A fired dishwasher shot and killed a chef and held a "small number" of people hostage for about three hours before he was shot by police at a crowded restaurant in a tourist-heavy area of downtown Charleston, South Carolina, on Thursday, authorities and one of the restaurant's owners said.

The hostages were freed with no injuries, Mayor John Tecklenburg said. The shooting took place at Virginia's restaurant on the usually crowded King Street, a line of shops and nice dining that caters to both tourists and residents in South Carolina's largest and most historic city.

Mr Tecklenburg quickly said the shooting was "the act of a disgruntled employee" and not a terrorist attack or a hate crime in a city where nine black church members were killed by a white man two years ago.

Bystanders wait at a police perimeter Credit: Reuters

"This was a tragic case of a disturbed individual, I think, with a history of some mental health challenges," he said at a news conference.

Authorities did not release the names of the gunman or the employee he killed, and would not specify the number of hostages who had been held.

The shooting was reported shortly after noon Thursday.

Peter Siegert, 73, and his son Peter Siegert IV, 45, were quoted by The Post and Courier of Charleston as saying that just after several waitresses and kitchen workers walked out the door without saying a word, a man in an apron with a gun came out of the kitchen and locked the front door.

"'I am the new king of Charleston,"' the Siegerts quoted the man as saying.

The man told diners to get on the floor and move to the back of the restaurant. The Siegerts said they escaped out a back door and didn't know how many people were left behind.

One of the restaurant's owners, John Aquino, told WCSC-TV that a dishwasher who had been fired came back to the restaurant and shot a chef to get revenge.

The restaurant was packed with a lunchtime crowd and the first officers to arrive were able to get the man who was shot and a number of diners out safely, interim Charleston Police Chief Jerome Taylor said.

Story continues

9:07PM

Siege ends after police shoot suspected gunman

The mayor says a hostage situation in a Charleston, South Carolina, restaurant has ended with the gunman being shot by police.

Charleston Mayor John Tecklenburg said the restaurant employee shot by the gunman Thursday has died.

Interim Charleston Police Chief Jerome Taylor says all the hostages at Virginia's restaurant were rescued safely. He didn't say how many there were.

Mr Tecklenburg says the man who took the hostages is in critical condition.

Authorities did not release the names of the gunman or the man killed.

8:22PM

Wounded person rushed to ambulance

NEW video from the scene in downtown Charleston as medics rush someone to an ambulance. https://t.co/hqX7IdwrNy#chsnewspic.twitter.com/gKLZ66xa2I — WCBD (@WCBD) August 24, 2017

8:04PM

Owner says suspect is 'fired dishwasher'

An owner of a South Carolina restaurant where a gunman was holding hostages says he's been told the man is a dishwasher who was angry with and shot a male chef.

John Aquino told WCSC-TV that he thinks the gunman was fired and came back to Virginia's in downtown Charleston on Thursday to get revenge.

Aquino says he doesn't know how badly the chef was injured.

8:03PM

'Shooter down'

Police breaking down perimeter, allowing people closer to scene. One officer told citizens shooter is down. #chsnews — Andrew Knapp (@offlede) August 24, 2017

Police have begun taking down the perimeter they put up to protect public.

7:37PM

'Loud bang'

Reporters on the scene say they have heard some kind of loud bang.

Loud bang heard at Charleston shooting site. #chsnews — Andrew Knapp (@offlede) August 24, 2017

7:21PM

Police warn residents to avoid area

King btwn Calhoun & Morris blocked to motorist & pedestrian traffic active shooter in 400 block of King people to avoid the area. — Charleston P.D. (@CharlestonPD) August 24, 2017

7:17PM

'Man came out of kitchen'

Tom and Patsy Plant told The Post and Courier of Charleston they were eating at Virginia's restaurant and saw a man come out of the kitchen with a gun in his hand who said, "There's a new boss in town."

The man looked like "an ordinary grandpa, but he had a crazy look," the couple said. They were able to escape out a back door.

7:16PM

Memories of a hate crime

The location of the shooting immediately raised fears of a hate crime.

The site is a few blocks away from Emanuel AME church, where nine black members of a church were killed by a white man during a June 2015 Bible study. Dylann Roof was sentenced to death in the case.

7:09PM

Bomb squad on scene

Charleston PD bomb squad has arrived at shooting site on King Street. #chsnewspic.twitter.com/3eFpq6jYdK — Andrew Knapp (@offlede) August 24, 2017

7:05PM

Two hostages

Police say two hostages remain inside the restaurant and negotiators are moving into place.

7:02PM

'The new king of Charleston'

The Post and Courier newspaper says the incident is centred on Virginia's restaurant.

Peter Siegert, 73, and his son Peter Siegert IV, 45, both of Maryland, were eating at Virginia's when two waitresses and three kitchen staff members marched through the restaurant and out the front door without saying anything. An older black man wearing an apron and dressed like a kitchen staff member walked through the front door holding a small caliber revolver. He locked the door and said “I am the new king of Charleston.”

6:59PM

Police have taken up positions in the street

DEVELOPING: Police are responding to an active shooting in downtown Charleston, S.C.; reports of hostage situation https://t.co/ibtMQH9mzmpic.twitter.com/Q8kbQbMuN1 — CBS News (@CBSNews) August 24, 2017

6:58PM

One person wounded

The mayor also confirmed at least one person was shot and taken to a local hospital.

6:57PM

Suspect is 'disgruntled former employee'

John Tecklenburg, Charleston mayor, said the gunman appeared to be a disgrunted former employee and that there was no suggestion of any terror connection.