Police appear to have arrested the man at the centre of a hostage situation in the West Australian community of Bunbury after negotiating with him for up to 13 hours.

Two shots were heard as tactical officers moved in to the location.

Police told 9NEWS the shots fired were "non-lethal rounds".

The alleged hostage was allowed to leave at 7am (AWST), just before officers moved in.

A 52-year-old man, whose identity is known to police, is believed to have taken the hostage at about 6.15pm (AWST) last night.

He allegedly drove the man to a park in Bunbury where he put up a sign and began a stand-off which lasted 13 hours.

Early reports the man was allegedly in possession of explosives were unconfirmed by police.

The hostage-taker's sign appears to read "Police release Batty Archibald CCC Report" but police have refused to comment on what that might mean.

The hostage earlier seemed to be unhurt, having been seen walking around in the area.