A truck drove into a crowd on a shopping street and crashed into a department store in central Stockholm yesterday, killing three people and wounding eight in what the prime minister said appeared to be a terrorist attack.

Part of central Stockholm was cordoned off and the area was evacuated, including the main train station. All subway traffic was halted on orders from the police.

"Sweden has been attacked. Everything points to the fact that this is a terrorist attack," Prime Minister Stefan Lofven told reporters during a visit in western Sweden. He was immediately returning to the capital.

Pictures showed a large blue truck with a mangled undercarriage smashed into the Ahlens department store. Thick smoke was rising from the scene.

A spokeswoman for transport company Spendrups told AFP that the truck "had been stolen during a delivery to a restaurant."

The incident occurred just before 1300 GMT at the corner of the store and Drottninggatan, the city's biggest pedestrian street, above ground from Stockholm's central subway station.

Many police and emergency services personnel were at the scene, a Reuters witness said.

Nobody has been arrested in connection with the attack police said. There was no immediate claim of responsibilty.

The attack followed a string of assaults in Europe by people using vehicles as weapons.

A truck slammed into a crowd of people outside a busy department store in central Stockholm yesterday, causing "deaths" in what the prime minister described as a "terror attack." Photo: Reuters

The deadliest attack came last year in France on the Bastille Day national holiday of July 14, when a man rammed a truck into a crowd in the Mediterranean resort of Nice, killing 86 people.

He was shot dead by police, and the Islamic State group later claimed responsibility.

Last month, Khalid Masood, a 52-year-old convert to Islam known to British security services, drove a car at high speed into pedestrians on London's Westminster Bridge before launching a frenzied knife attack on a policeman guarding the parliament building.

The incident killed five people, while Masood himself was shot dead by police.

And in December, a man hijacked a truck and slammed into shoppers at a Christmas market in Berlin, killing 12 people.

That attacker was shot dead by police in Milan four days later, and the rampage was claimed by the IS.

In 2014, IS spokesman Abu Mohammed al-Adnani called for attacks on citizens of Western countries and gave instructions on how they could be carried out without military equipment, using rocks or knives, or by running people over in vehicles.

A government source told Reuters all Swedish government offices had been closed. All ministers were safe, the source said.

"We were standing by the traffic lights at Drottninggatan (Queen Street) and then we heard some screaming and saw a truck coming," a witness, who declined to be named, told Reuters.

"Then it drove into a pillar at Ahlens City (department store) where the hood started burning. When it stopped we saw a man lying under the tire. It was terrible to see," said the man, who saw the incident from inside his car.

Radio Sweden reporter Martin Svenningsen said he saw three dead people "but probably more". A Reuters witness saw a number of body-like forms covered by blankets at the scene.

Police confirmed three deaths and eight people injured.

King Carl Gustaf, Sweden's head of state, expressed his horror at the attcak.

"Our thoughts are going out to those that were affected, and to their families," he said in a statement from the royal palace.

European politicians reacted with solidarity to the news of the attack, with European Commission President Jean-Claude Juncker saying that it was an "attack on us all."

Meanwhile, a spokesman for German Chancellor Angela Merkel said: "Our thoughts go out to the people in Stockholm, to the injured, their relatives, rescuers and police.

"We stand together against terror."