The Armed Offenders Squad (AOS) has descended on a property in Woodville in the search for a Dannevirke gunman.
A police spokeswoman said police were called to the Richardson St property about midday, and neighbouring streets had been cordoned off.
A Caltex Woodville staff member said Police had cordoned off Ferguson and Richardson Sts, located several blocks behind the service station.
"[AOS] are there and there's lots of police everywhere," she said. "People have been told to stay inside."
Earlier, a man was shot in the arm in Dannevirke this morning.
Police found the injured man shortly after they were called to a Hunter St property about 11am.
He has moderate, non-life-threatening injuries and has been taken to Palmerston North by ambulance.
A white station wagon was seen leaving the property after the shooting.
Police know who the offenders are and are trying to find them, a police spokeswoman said.
"We do not believe there is any risk to the wider community.
"However, residents of Hunter St and the surrounding areas can expect to see a continued police presence today as we examine the scene and speak to potential witnesses."
Hunter Street resident Chris Bone lives around six houses away from where the shooting occurred.
He said he had not heard any shots, but had seen around four police cars racing down the street.
More to come