An attacker shot at police officers outside an Istanbul nightclub early on Sunday before entering and opening fire at random inside the building, where around 500-600 people were celebrating the New Year, broadcaster NTV said.
Istanbul Governor Vasip Şahin said at least 35 people had been killed and only one attacker was involved.
He described the incident as a terrorist attack.
About 40 people are believed to have been injured in the attack.
Turkish television footage shows armoured police vehicles on the street outside the Reina club in the Ortakoy district.
The attacker was reportedly wearing a Santa Claus costume and carrying a long-barrelled shot gun.
Police special forces and explosives experts were still searching the club in the Ortakoy district of Turkey's most populous city, an NTV correspondent at the scene said. The whereabouts of the attacker was unclear.
Footage from the scene showed at least six ambulances with flashing lights and civilians being escorted out.
Media reports said police have cordoned off the area and an operation is ongoing.
Istanbul has been the target of a series of recent attacks by IS and Kurdish extremist groups.
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