In pics: Death and despair as gunman opens fire at Oslo gay bar on Pride parade day

Terrified revellers at a gay bar in Oslo hid in a basement and desperately called loved ones as a gunman went on the rampage, killing two people and injuring more than 20 on the day the city was due to celebrate its annual Pride parade.

(Text: Reuters)

The attack took place in the early hours of Saturday, with victims shot inside and outside the London Pub, a longstanding hub of Oslo's LGBTQ scene, as well as in the surrounding streets and at one other bar in the centre of the Norwegian capital.

Authorities said the suspect, a 42-year-old Norwegian citizen of Iranian origin, was believed to be a radicalised Islamist with a history of mental illness who had been known to intelligence services since 2015.

Bili Blum-Jansen, who was in the London Pub, said he fled to the basement to escape the hail of bullets and hid there along with 80 to 100 other people.

"Many called their partners and family, it felt almost as if they were saying goodbye. Others helped calm down those who were extremely terrified," he told TV2.

"I had a bit of panic and thought that if the shooter or shooters were to arrive, we'd all be dead. There was no way out."

The suspect was detained minutes after embarking on the shooting spree, according to police who said they believed he acted alone. Two weapons, including a fully automatic gun, were retrieved from the crime scene, they added.

Other witnesses described the chaos that erupted inside and outside the London Pub, which has been open since 1979.

Security authorities raised the country's terrorism threat assessment to its highest level following the attack.

Norwegian police, who are not normally armed, will now carry guns until further notice as a precaution, national chief Benedicte Bjoernland said.

The organisers of Oslo Pride cancelled Saturday's parade, citing police advice. "We will soon be proud and visible again, but today we will mark Pride celebrations at home," they said.