AT least one gunman, allegedly disguised as Santa, has killed 39 clubbers inside an Istanbul nightclub in a New Year's Eve terror attack.
The gunman shot his way into the popular Reina nightclub packed with New Year's revellers at around 1.30am local time (10.30am AEDT).
The attacker is believed to have opened fire at police outside the nightclub before entering and firing on people inside.
Media reports said more than one assailant may have been involved in the attack.
The current location of the gunman is unknown, and there are reports a gunman is still inside the nightclub, possibly in the toilet.
Istanbul's governor Vasip Sahin confirmed 35 revellers were murdered attack and around 40 others were wounded at the nightclub in Istanbul's Ortakoy district.
CCTV footage has also emerged from inisde the nightclub, allegedly showing the gunman in a jacket and Santa hat making his way across the nightclub floor.
Turkish journalist Ürün Dirier tweeted what is reportedly CCTV from inside the club.
He was seen moving around the club after the attack.
Just before he goes out of view he drops something to the ground, which is covered in debris.
Reina'daki silahlı saldırganlardan ilk görüntüler. Yaralı sayısı 50 deniyor. pic.twitter.com/XWU2Pswnto— Ürün Dirier (@DirierUrun) December 31, 2016
The attack sparked mass panic, with some diving into the Bosphorus Strait between Europe and Asia to escape the bullets. Rescuers were battling to salvage them to safety.
Turkish television channel NTV said special force police officers were searching the nightclub.
"A terrorist with a long-range weapon ... brutally and savagely carried out this incident by firing bullets on innocent people who were there solely to celebrate the New Year and have fun," Istanbul's Governor Sahin told reporters at the scene.
"Unfortunately (he) rained bullets in a very cruel and merciless way on innocent people who were there to celebrate New Year's and have fun.
"Unfortunately, at least 35 of our citizens lost their lives. One was a police officer. Forty people are receiving treatment in hospitals," Sahin added, telling reporters at the scene it was a "terror attack".
Australia's Department of Foreign Affairs and Trade (DFAT) is looking into whether there were any Australians involved in the attack.
"The Australian Embassy in Ankara is liaising with local authorities to determine whether any Australians may have been involved in the nightclub attack that occurred in Ortakoy, Istanbul, on the morning of 1 January," a spokesman said.
As many as 700 people were dancing to celebrate the New Year at the nightspot, which chimed in barely an hour before the attack.
The elite club targeted in the attack lies on the shore of the Bosphorus Strait in Turkey's most populous city.
Footage taken from the outside of the club and posted to YouTube after the attack shows police and ambulance vehicles at the scene.
Media reports said police have cordoned off the area and an operation is ongoing.
Istanbul has been the target of a series of recent attacks by Islamic State and Kurdish extremist groups.
The latest attack comes as Turkey remains on a heightened state of alert following a spate of terror attacks across the country.
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.
Less than two weeks ago 13 Turkish soldiers were killed and dozens more wounded in a car bombing targeting off-duty soldiers being taken by bus on a weekend shopping trip.
Turkish President Tayyip Erdogan blamed the militant Kurdistan Workers Party (PKK) for the car bomb attack on a bus in the central city of Kayseri.
That explosion came a week after 44 people were killed on December 10 in a double bombing in Istanbul after a football match. The attack was claimed by Kurdish militants.
In June, 47 people were killed in a triple suicide bombing and gun attack at Istanbul's Ataturk airport, with authorities blaming the Islamic State group.
Another 57 people including 34 children were killed in August in a suicide attack by an IS-linked bomber at a Kurdish wedding in the southeastern city of Gaziantep.
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