Police have blocked an area in the western Auchenflower area of Brisbane and are dealing with a "police incident" involving two people "who appear to be armed".
It is understood that two people were armed, but did not shoot.
The police have issued an emergency statement and closed a number of streets.
Earlier reports said the gunman had fired, but police said they did not do so at 1 p.m.
Police arrived at 11:00 and issued a statement under the Public Safety and Protection Act at noon.
Police have blocked the area under Coronation Drive, Lang Parade, Dunmore Terrace and Chasely Street.
The police warned residents to avoid the area.
Staff at Wesley Hospital were told the Brown Code was in effect-meaning the hospital was under "external threat."
A Queensland ambulance spokeswoman said the hospital was unaffected and still had access to the Wesley hospital.
Earlier, passengers on a bus were told that the bus would detour from Coronation Drive in Auchenflower because a gunman was shooting ahead.
TransLink has warned passengers that all its buses will be diverted and CityCat will be shut down.
"as emergencies require emergency services, buses travelling along the Coronation Drive are now forced to turn in two directions, so they will miss a few stations," the statement said.
"CityCat will be shut down between the Milton and the Regatta wharf. Customers are asked to avoid the area. "
