An armed gang is on the loose after killing two people with grenades and guns in an apparently random attack on a Christmas market in the Belgian city of Liege.

Dozens of other bystanders were injured in the rampage in a busy square packed with shoppers.

Men, women and children fled down the streets of the city centre - some still carrying shopping bags as ambulances and police descended on the area.

There was no information about the identity of the attackers, believed to number two or three, or their motive. But the Belgian public broadcaster VRT reported they remained at large and police were telling residents to stay in their homes or seek shelter in shops or public buildings.

All traffic was told to leave the city centre and all shops in the area were closed, some with many customers stranded inside.

Police helicopters flew over the city and a medical post was set up in the courtyard of the palace of the Prince Bishops court house located on the site.

In Brussels, Interior Ministry official Peter Mertens confirmed the attack and said at least one or two attackers were involved and at least one person was killed and several were wounded. Emergency medical teams were called in from as far away as the Netherlands.

One report said that three men lobbed grenades into a crowd at a bus shelter and opened fire with guns at about 12.30pm. One of the attackers was apparently killed, a man aged about 40.

A spokeswoman for the prosecutor's office in Brussels, confirmed there had been explosions and gunfire, causing injuries.

Place Saint-Lambert is a busy crossroads. Every day 1,800 buses serve the square, which leads to central shopping streets. The Place Saint-Lambert and the nearby Place du Marche host the Liege's annual Christmas market which consists of 200 retail cabins and attracts some 1.5 million visitors a year.