"At this moment the police consider several scenarios, including the possibility of a terrorist attack," the statement said.

It was unclear if the attack took place on the tram or at a nearby tram stop.

Earlier on Monday afternoon, Utrecht police released a CCTV image, apparently taken on public transport, of a man they identified as 37-year-old Turkish-born Gokman Tanis.

They had asked people to “look out” for him in connection with the shooting, and warned the public not to approach him.

There were unconfirmed media reports the man had a police record and recently faced a rape charge.

A family member told one local media outlet that the incident may have been domestic-related and a female victim may have been targeted by the suspect.

However, a local businessman told BBC Turkish that the suspect had previously fought in Russia's republic of Chechnya where jihadist groups, including those aligned with Islamic State, have long operated. The man said he had previously been arrested for Islamic State connections.

Witnesses described seeing the man "shooting wildly" and a woman badly hurt.

A witness, Dan Molenaar, told NOS Radio he had been in the tram when it suddenly stopped, and he saw a woman further down the road. At first he thought someone had been hit by the tram.

Some people ran to help her but then he saw a man with a drawn gun approaching the group.

"It seemed like he wanted to attack that person again, or maybe the people who were helping her," he said. "Then I thought, 'get away quickly'."

Passengers started fleeing the tram and he heard more shots.

AD.nl reported a woman was hit in the chest by several bullets. Two people were lying injured on the street and another in the tram.

Witness Jimmy de Koster, who lives nearby, told De Telegraaf that he saw several shots fired and a young woman lying on the ground pleading “I have done nothing”.

“I heard ‘bang bang bang’ three times. Four men walked quickly towards her and tried to drag her away and then I heard ‘bang bang bang’ again and those guys let go of her. It was chaos.”

Another eyewitness said they saw an injured person running out of the tram, news site NOS reported.

The victim had blood on her hands and clothes. "I took her into my car and helped her," the witness said. "When police arrived she was unconscious."

Dutch Prime Minister Mark Rutte spoke briefly about a “worrying situation” developing in the city, and broke off from meetings to consult with a crisis team.

Schools in the area were told to keep their doors shut, and mosques in Utrecht closed their doors on police advice. Extra police were deployed to train stations and mosques elsewhere in the Netherlands.

The Dutch National Coordinator for Counter Terrorism and Security (NCSC) said the attack had "all the characteristics of a terrorist attack". It raised the terror threat level in Utrecht to the highest level but it was later downgraded.

Rutte said the country was shocked by the attack, and police were doing everything in their power to catch a suspect or suspects.

"An act of terror is an attack on our civilisation, on our open and tolerant society," he said. "If it is an act of terror, there is only one answer: our rule of law and our democracy is stronger than fanaticism and violence. We will never give in to intolerance, never."