The incident happened yesterday about 10am. Police received multiple emergency calls after a gang altercation at the Kuirau Park markets near Rotorua's CBD.
"Reports from the public were that there was an incident between members of rival gangs, and that shots had been fired. This happened near a children's playground in the middle of the Saturday morning market, while the area was teeming with shoppers.
"A short time later, Police located a vehicle with damage consistent with a shot being fired at it. An examination of the scene confirmed to Police that a firearm had been involved. "
Yesterday afternoon police executed a search warrant at a Rotorua address after receiving information from the public.
A 27-year-old man was arrested with the assistance of members of the Armed Offender's Squad. The man will appear in the Rotorua District Court tomorrow facing firearms and disorder charges.
Detective Senior Sergeant John Wilson of the Bay of Plenty Police said police took this type of offending very seriously and enquiries into this matter were continuing.
"The actions of these individuals in possessing and using a firearm in such a public place posed a very real and significant risk to innocent members of the public going about their business with their families on a sunny Saturday morning.
"I am aware that there were many people present when this incident occurred who may be able to help this investigation. If you witnessed this incident I urge you to come forward and make contact with the Rotorua Police. Police are also keen to obtain any mobile phone footage that may have been captured by witnesses.
"It is only through sheer luck that no one was hurt, and Police are determined to identify all those involved and hold them to account for their actions."
Rotorua MP Todd McClay said the incident was concerning but was not isolated to Rotorua.
"I congratulate the police on making the arrest so quickly, but I think it demonstrates the significant harm the gangs do to communities throughout New Zealand."
"This is not systematic to Rotorua, there are gangs in many parts of New Zealand and I think the police did a very good job keeping on top of them but ultimately the gangs are criminal organisations."
McClay said police now had greater tools to focus on the harm gangs did "and in this case they made an arrest very quickly".
Anyone with information is asked to contact the Rotorua Police Station on 07 348 0099. Alternatively information can be provided anonymously via Crimestoppers on 0800 555 111.