Dutch police have arrested the main suspect in Monday morning's shooting on a tram in Utrecht that left three people dead and five wounded.

Prosecutors say Turkish-born Gokmen Tanis, 37, has had previous run-ins with police, but they did not give any information about a possible motive. Police said they also detained another man on suspicion of involvement but released no further details.

"We assume a terror motive," Utrecht Mayor Jan van Zanen said, though he added that other motives could not be ruled out.

"If it had terror motives, that is being investigated. But it was very serious. The world shares our grief," Prime Minister Mark Rutte said.

Dutch counter terrorism police prepare to enter a house after a shooting incident in Utrecht. Heavily armed officers with sniffer dogs zeroed in on an apartment building close to the shooting. (Peter Dejong/Associated Press)

In the immediate aftermath of the attack, Dutch military police tightened security at airports and key buildings in the country, and Rutte declared: "If it is a terror attack, then we have only one answer: Our nation, democracy, must be stronger than fanaticism and violence."

Turkish President Recep Tayyip Erdogan says the Turkey's intelligence agency is investigating whether Tanis was personally motivated or whether it was an act of terrorism.

The Dutch anti-terror co-ordinator raised the threat alert in Utrecht province to its highest level immediately after the shooting around 10:45 a.m. local time. But the level was reduced to five, one below the highest level, following the arrest.

A forensics expert looks for clues inside the tram where the shooting happened. (Peter Dejong/Associated Press)

The attack came three days after 50 people were killed when an immigrant-hating white supremacist opened fire at two mosques in Christchurch, New Zealand, during Friday prayers. There was no immediate indication of any link between the two events.

The shooting took place in Kanaleneiland, a quiet residential district on the outskirts of Utrecht with a large immigrant population.

"It's frightening that something like this can happen so close to home," said Omar Rahhou, who said his parents lived on a street cordoned off by police. "These things normally happen far away but this brings it very close, awful."

The shooting took place in a residential neighbourhood of Utrecht. Police say at least three people were killed and five wounded during the shooting on a tram. (EPA-EFE)

Witness Daan Molenaar, who said he had been sitting at the front of the tram when the shooting started, told national broadcaster NOS he did not believe it was a terrorist attack.

"The first thing I thought was, this is some kind of revenge or something, or somebody who's really mad and grabbed a pistol."

Prime Minister Justin Trudeau tweeted his condolences to the victims' families and posted a phone number for any Canadians needing assistance in Utrecht.

Canada condemns the horrible attack in the Netherlands today. We send our condolences to the victims’ loved ones, and hope all those injured recover quickly. We are monitoring the situation closely – Canadians in Utrecht who are in need of assistance can call +31(0) 88 269-0000. —@JustinTrudeau

'He should pay the penalty'

The father of the suspect says his son should be punished if he's to blame.

Mehmet Tanis, his father who lives in Turkey's central Kayseri province, told the private Demiroren news agency that he hadn't spoken to his son in 11 years. He says "if he did it, he should pay the penalty."

Separately, Turkey's official Anadolu news agency said the suspect's relatives believe he shot at someone close to the family due to "family issues."

Initially, police confirmed one person had been killed after they erected a tent over a body lying next to the tram. Utrecht Mayor Jan van Zanen later revised the death toll to three and said nine others were wounded, three of them seriously.

Police in Utrecht then reduced the number of people injured to five, but did not give a reason for the revised number.

'Stronger than fanaticism and violence'

Dutch Prime Minister Mark Rutte called the situation "very worrying," while the anti-terror co-ordinator said he was holding a "crisis" meeting.

"There is a mix of disbelief and disgust" throughout the Netherlands, Rutte said. "If it is a terror attack, then we have only one answer: our nation, democracy must be stronger than fanaticism and violence."

Dutch counterterrorism police prepare to enter a house after the tram shooting. (Peter Dejong/Associated Press)

Utrecht police cordoned off the 24 October Square tram station, located in a residential neighbourhood outside the city centre, while emergency services rushed to the scene.

Helicopters were dispatched to airlift victims to hospital and police were appealing to the public to stay away to allow first responders to do their work.

Police instructed schools in the city to keep their doors closed. Mosques and transit hubs were also closed. Shows were cancelled at concert halls and movie theatres.