Witnesses alerted police shortly after 9.30pm on Friday to an unknown perpetrator having wounded several people with a knife on a central square, the Fronhof.
Police said the perpetrator was on the run, and they so far had only very thin information on the assailant.
Police are at the scene of a stabbing attack at a festival in Solingen, western Germany. (AP PHOTO)
One of the festival organisers, Philipp Müller, appeared on stage and asked festivalgoers to "go calmly; please keep your eyes open, because unfortunately the perpetrator hasn't been caught." He said many people had been wounded by "a knifeman".
At least one helicopter was seen in the air, while many police and emergency vehicles with flashing blue lights were on the road and several streets were closed off.
Mayor Tim Kurzbach said in a Facebook post that "This evening, we in Solingen are all in shock. We all wanted to celebrate our city's anniversary together and now have dead and wounded to lament."
"It breaks my heart that an attack on our city happened," he added.
The local newspaper Solinger Tageblatt quoted Celine Derikartz, its reporter covering the festival, as saying that "the atmosphere is spooky". She said a party atmosphere had turned to shock within minutes and she saw festivalgoers weeping.
The "Festival of Diversity," marking the city's 650th anniversary, began on Friday and was supposed to run through Sunday, with several stages in central streets offering attractions such as live music, cabaret and acrobatics.
Solingen has about 160,000 residents and is located near the bigger cities of Cologne and Duesseldorf.
Germany's top security official, Interior Minister Nancy Faeser, recently proposed toughening weapons laws to allow only knives with a blade measuring up to 6cm to be carried in public, rather than the length of 12cm which is allowed now.
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