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(UPDATE) 35 dead, 40 injured in Istanbul nightclub New Year's shooting

ISTANBUL: At least 35 people were killed in a terror attack in Istanbul Sunday when at least one gunman, reportedly dressed as Santa, stormed an elite nightclub where party-goers were celebrating the New Year, the latest carnage to rock Turkey after a bloody 2016.

At least one gunman shot dead a policeman and a civilian at the entrance to the Reina nightclub, one of the city's most exclusive party spots, and then went on a shooting rampage inside, Istanbul governor Vasip Sahin said.

Dogan news agency said there were two gunmen dressed in Santa Claus outfits.

"Unfortunately, at least 35 of our citizens lost their lives. One was a police officer. Forty people are receiving treatment in hospitals," Sahin told reporters at the scene of the nightclub on the Bosphorus on the city's European side.

"The attacker - in the most brutal and merciless way - targeted innocent people who had only come here to celebrate the New Year and have fun," Sahin said.

Television pictures showed the New Year party-goers - including men in suits and women in cocktail dresses - emerging out of the nightclub in a state of shock.

Sahin said the attack started at 1:15 am local time (2215 GMT), just after the revellers had seen in the New Year.

"What happened today is a terror attack," he added.

The governor did not specify the fate of the attacker or if there had been more than one protagonist.

Many party-goers threw themselves into the Bosphorus in panic after the attack and efforts are underway to rescue them from the waters, NTV television said.

Dogan news agency reported that some witnesses claimed the attackers were "speaking Arabic" while NTV broadcaster said special force police officers are still searching the nightclub.

TV images showed the scene cordoned off by police officers. According to Dogan, there were at least 700 revellers celebrating the start of 2017 at the club.

The nightclub in the Ortakoy district of Istanbul is one of the most elite spots in the city, and getting past the bouncers who seek out only the best dressed is notoriously hard.

Turkey has been hit by a string of attacks in recent months blamed on Kurdish militants and Islamic State jihadists.

"Tragic start to 2017 in Istanbul. My thoughts are with those affected by the attack on people celebrating New Year and with the Turkish people," NATO Secretary General Jens Stoltenberg wrote on Twitter.

The White House condemned what it said was a "horrific" attack and its "savagery."

Turkish President Recep Tayyip Erdogan, who is in Istanbul for the New Year, had been informed of the attack, local media said.

The attack also came as the Turkish army is waging a four-month incursion in Syria to oust IS jihadists and Kurdish militants from the border area, taking increasing casualties.

Amid fears of another attack in Istanbul, at least 17,000 police officers were deployed in the city for this year's New Year's Eve celebrations.

Some officers, as is customary in Turkey, dressed themselves as Santa Claus as cover, television reports on the deployment ahead of the New Year had showed.

The attack evoked memories of the November 13, 2015 attack in Paris when gunmen stormed a popular concert venue, the Bataclan, sprayed bullets at random, eventually killing 90 people.

After the attack, the US embassy told citizens to avoid the area and contact family members to confirm they were safe.

"Extremist groups are continuing aggressive efforts to conduct attacks in areas where US citizens and expatriates reside or frequent," it said.

As is customary after such attacks in Turkey, the authorities slapped a broadcast ban on images from the incident. -- AFP

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