At least eight people have been killed in New York after a man drove a truck onto a busy bike path and emerged with a fake gun.

The man, who was shot and taken into custody by police, injured at least 15 people at West Street and Chambers Street, which is near the site of the World Trade Centre attacks, at 3:15pm Tuesday afternoon local time.

The attack is being investigated as a possible act of terrorism. Witnesses told the New York Police Department the man was heard yelling: "Allah Akhbar".

LIVE: Eight dead, 15 injured, as truck mows down cyclists in "terror attack"

The man also hit a school bus before he drove onto the bike path. Dramatic images showed mangled bikes left strewn across the pavement, while two bodies could be seen lying under a tarp.

The attack comes just hours before New York's annual Halloween parade, which attracts thousands to the West Village, a few blocks north of Lower Manhattan.

It's believed the people killed were run over by the truck, rather than being shot Police told local media the guns the motorist was carrying were fake.

Stuyvesant High School student Tawhid Kabir, 20, told news.com.au from near the scene: "I came out and saw a cop. "I thought it was an accident so I went to see what happened."

He saw a man with "two guns".

"He was running in the middle of the street...There was another guy not in a cop uniform who was also chasing him."

The students all dropped to the ground when the shots rang out.

"When I heard the gunshots I was so scared.

"What happened was there was a car crash ... he came out of one of the cars. He had two guns. He was running around Chambers and somebody started to chase him," said Laith Bahlouli, 14, another Stuyvesant student. "I heard four to six gunshots - everybody starts running."

Witnesses described a scene of terror, saying the shooter ran over two people before ploughing into a school bus.

"Jesus! A car just ran over 2 people and then crashed into a school bus. I see two dead bodies and citibikes on the floor destroyed," a Twitter user wrote.

The suspect then got out of his vehicle with two guns, another witness said.

Video of the scene shows at least two people lying limp in the street.

Photos show a smashed up Home Depot rental truck, and two mangled Citi Bikes.
Counter-terror police were searching the truck for explosives.

Uber driver Chen Yi said he saw a truck plough into people on a popular bike path adjacent to the West Side Highway. He said he then heard seven to eight shots and then police pointing a gun at a man kneeling on the pavement.

"I saw a lot of blood over there. A lot of people on the ground," Yi said.

His passenger, Dmitry Metlitsky, said he also saw police standing near a man who was on his knees with his hands up, and another man bleeding on the ground nearby. He said the truck had also collided with a small school bus and one other vehicle.

A witness told ABC's New York station WABC: "Everybody started running...[the driver] kept going all the way down full speed."

If the attack happened later the street would have been full of trick-or-treaters, the witness added.

A spokesman for New York Mayor Bill de Blasio said that the mayor was on the way to the area and that there was "no active threat." New York Gov. Andrew Cuomo was also headed to the scene.

The FBI Joint Terrorism Task Force has joined the NYPD on the scene, according to NBC.