A sports utility vehicle has ploughed through a Christmas parade in the US state of Wisconsin, killing five and injuring at least 40 people, including children and causing "some fatalities”, police said.

The incident occurred at around 4:39pm (22:39 GMT) on Sunday in the city of Waukesha, about 32 kilometres (20 miles) west of Milwaukee.

Waukesha Police Chief Dan Thompson said a person of interest was in custody and the suspect vehicle had been recovered.

"A red SUV drove into our Christmas parade that we were holding downtown. More than 20 individuals were injured as a result of this incident,” Thompson told reporters.

"Some of the individuals were children and there are some fatalities as a result of this incident.”

Asked about the deaths, Thompson said: "I don’t have an exact number at this time.”

It was not known whether the incident was related to terrorism, but an earlier shelter-in-place order in the town of around 72,000 had been lifted, he added.

A video posted online showed a red SUV ploughing through the parade, appearing to run over more than a dozen people before crowds ran from sidewalks to offer assistance.

In a second video, police appeared to open fire on the vehicle as it crashed through street barriers.

The local CBS affiliate later showed a picture on Twitter of what appeared to be the red SUV involved with its hood crumpled and front fender hanging off, parked in a driveway.

Corey Montiho, a Waukesha school district board member, told the Milwaukee Journal Sentinel that his daughter’s dance team was hit by the SUV.

"They were pom-poms and shoes and spilled hot chocolate everywhere. I had to go from one crumpled body to the other to find my daughter,” he said. "My wife and two daughters were almost hit. Please pray for everybody. Please pray.”

Chris Germain, co-owner of the Aspire Dance Center studio, told The Associated Press news agency that he had about 70 girls in the parade ranging from as young as 2 being pulled in wagons to age 18.

Germain, whose own 3-year-old daughter was in the parade, said he was driving at the head of their entry when he saw a maroon SUV that "just blazed right past us”. A police officer came by on foot chasing after, he said. Germain said he jumped out of his own SUV and gathered the girls who were with him.

"There were small children laying all over the road, there were police officers and EMTs doing CPR on multiple members of the parade,” he said.

One witness said the driver also hit the "Dancing Grannies”, and at least one person flipped over the hood of the SUV, according to Milwaukee’s WISN-TV, an ABC affiliate.

"Members of the group and volunteers were impacted and we are waiting for word on their conditions,” the Milwaukee Dancing Grannies said on their Facebook page. "Please keep the Grannies, all those injured, and all those who witnessed this horrible event in your thoughts and prayers.”

Photos and videos of Waukesha circulating on Twitter showed police cars and ambulances crowding a street decked out with Christmas lights in the aftermath of the incident. Bundled up people huddled on sidewalks as dusk fell.

Some of the wounded were taken to the hospital by ambulance, others by police and still more by family and friends, Thompson said.

"As we were walking back in between the buildings … we saw an SUV cross over, just put the pedal to the metal and just zooming full speed along the parade route. And then we heard a loud bang, and just deafening cries and screams from people who are struck by the vehicle,” Angelito Tenorio, an alderman in nearby West Allis, told the Milwaukee Journal Sentinel.

Police officers ran down the street, telling parade watchers to take shelter in stores, the newspaper said.

Wisconsin Governor Tony Evers said he and his wife, Kathy, were "praying for Waukesha tonight and all the kids, families, and community members affected by this senseless act”.