UPDATED 5.54PM: A person believed to have been dressed in a Santa Claus costume has opened fire at a nightclub in Istanbul during New Year's celebrations, killing at least 35 people and wounding at least 40 others, media reports say.

Private NTV television said a police officer and a civilian were killed in the attack targeting the popular Reina nightclub in Istanbul's Ortakoy district.

Media reports said more than one assailant may have been involved in the attack and more than 500 people were inside the club at the time.

The attacker is believed to have opened fire at police outside the nightclub before entering and firing on people inside. Some customers jumped into the waters of the Bosporus to escape the attack, the report said.

One attacker is reportedly still inside the nightclub.

Sky's Ian lee reports.

"If the attacker or attackers have been neutralised, frankly we just don't know right now, the police haven't given us any of the information, they have kept us at a distance because the situation is still very much fluid."

Footage from the scene showed at least six ambulances with flashing lights and civilians being escorted out. NTV said police had cordoned off the area and an operation to capture the assailant was ongoing.

An AP photographer said police cordoned off the area about three kilometres away from the nightclub and reported multiple ambulances passing by.

One man, who was getting loaded into an ambulance after the attack, said he got shot in the leg.

"Its crazy people came in shooting everything...I saw one person, they're shooting and I'm hiding."

Security measures had been heightened in major Turkish cities, with police barring traffic leading up to key squares in Istanbul and the capital Ankara. In Istanbul, 17,000 police officers were put on duty, some camouflaged as Santa Claus and others as street vendors, state news agency Anadolu reported.

The NZ Ministry of Foreign Affairs and Trade said its embassy in Ankara is liaising with authorities there following the attack.

“At this stage there is no indication that any New Zealanders have been caught up in the incident.”

“There are 109 New Zealanders registered with the Ministry of Foreign Affairs and Trade as being in Turkey.”

On its SafeTravel website page for Turkey, the ministry said there is “some risk” associated with travelling anywhere in Turkey. Places deemed high risk include the cities of Istanbul and Ankara, and 15 provinces.

The city of Diyarbakir is deemed an extreme risk, as is any place within 10km of the border with Syria.

Ankara and Istanbul have been targeted by several attacks in 2016 carried out by the Islamic State group or Kurdish rebels, killing more than 180 people.

No responsibility for the attack has been claimed yet.