A man who took five people hostage and was shot twice by police in a Perth siege overnight was using a replica handgun, police say.

Heavily armed police surrounded a house in Samson Street, in Mosman Park about 9:30pm after receiving reports of an armed gunman.

A police negotiator and the tactical response group were brought in, but the siege ended an hour and a half later after police shot the 26-year-old man.

Assistant Police Commissioner Michelle Fyfe said the gunman was shot twice, once in the upper body and once in the face.

Assistant Commissioner Fyfe said the gunman left the home just after 11:10pm and was confronted by heavily armed officers from the tactical response group.

She said he ignored repeated warnings to drop the weapon.

Assistant Commissioner Fyfe said it was not until ballistic experts examined his firearm that it was revealed to be a replica.

The man remains in a critical condition in the intensive care unit of a Perth hospital after undergoing surgery.

Some of the five hostages, whose hands and feet were bound with cable ties, had to be carried out of the home by police.

Assistant Commissioner Fyfe said police are yet to talk with the gunman or establish a motive for the siege.

She said the investigation was complex and would take quite some time.

She said hostages, three men aged 21, 24 and 25, and two women, aged 22 and 59 years, were cooperating with police but had been traumatised and needed time to recover from the ordeal.

Residents evacuated over bomb fears

Neighbours were evacuated from their homes due to fears a suspicious package at the home may have been a bomb, but it turned out to be a false alarm.

A neighbour said he heard a couple of gunshots, as well as shouting.

"I was kind of more concerned for my kids' safety to be honest with you," he said.

"There were police outside shouting, dogs barking.

Mosman Park residents were evacuated from their homes after reports of an armed gunman in a nearby house. ( Supplied )

"I was just doing what I was told by them [police], they told us to leave the house so we did."

Peter Salom, who lives with his family across the road, said he heard commotion about 9:00pm.

"It got fairly intense with the police yelling 'put your gun down, put your gun down' and then we heard a couple of shots which was fairly frightening on a quiet little street," he said.

"You could hear it plain as day 'put the gun down, put the gun down' and then a fair amount of yelling after that, and then a couple of shots.

"We had to get the kids out of bed, and get them out of the house, and take off."

Internal affairs, major crime squad to investigate

Perth Police Inspector Rob Harrison said it was still early in the investigation.

"I'm not speculating at this stage on the circumstances, that's under investigation, hopefully later today we can provide you with some more information," he said.

Inspector Harrison said police are speaking to the hostages, but he could not say if any had been injured.

He said a member of the public made the initial triple-0 call and urged anyone else with information to come forward.

"We know that people are going to work this morning, they may have seen something or heard something, if they could please let police know, that would be appreciated," Inspector Harrison said.

There are two separate investigations underway into the incident.

One will be headed by officers from major crime and the second from the police internal affairs unit.

Police earlier thanked the community for their patience.

"We appreciate some have been displaced from their homes for ongoing safety reasons," the statement said.

Police have asked for people to avoid the area, where officers remain on the scene.