A man who was shot by police while engaged in a fancy dress sex act at a swingers party was not holding a gun at the time, despite the claims of police, a nightclub owner says.

The man, dressed as Batman character the Joker, and a woman in a Harley Quinn costume popularised by the movie Suicide Squad, were shot by police at Inflation nightclub on King Street at 3.41am on Saturday.

The man was taken to the Royal Melbourne Hospital in a critical condition, but was stabilised later.

The woman, who was shot in the leg by police, was taken to The Alfred hospital with non-life-threatening injuries.