Turkish police are hunting for a gunman who opened fire at a crowded Istanbul nightclub during new year celebrations, killing at least 39 people and wounding nearly 70 others in what authorities said was a terror attack.

The attacker, reportedly dressed as Santa Claus and armed with a long-barrelled weapon, killed a policeman and a civilian outside the popular Reina club at around 1.15am before entering and firing on people partying inside, governor Vasip Sahin said. He did not say who may have carried out the attack.

Interior minister Suleyman Soylu said the attacker, who has not been identified, is still at large, adding: "Our security forces have started the necessary operations. God willing he will be caught in a short period of time."

President Recep Tayyip Erdogan said: "I vehemently condemn the terror attack in Istanbul's Ortakoy neighbourhood in the first hours of 2017."

Offering his condolences for those who lost their lives, including "foreign guests", Mr Erdogan added: "Turkey continues its combat against terror and is absolutely determined to do whatever is necessary in the region to ensure its citizens' safety and peace."

The private NTV news channel said the assailant entered the up-scale nightclub, on the European side of the Bosporus waterway, dressed in a Santa Claus outfit. The minister said the attacker is believed to have carried out the assault alone and left the club wearing different clothing.

At least 15 of the dead were foreign nationals, Mr Soylu said, without giving information on their nationalities. Five of the victims were identified as Turkish nationals while authorities were still trying to identify the rest.

At least 69 people were being treated in hospital, four in serious condition, Mr Soylu added.

Three or four of the Turkish victims may have been employees at the nightclub, he said.

About 600 people were celebrating inside the club that is often frequented by famous locals, including singers, actors and sports stars.

"This was a massacre, a truly inhuman savagery," Mr Soylu said.

Mr Sahin said: "Unfortunately (he) rained bullets in a very cruel and merciless way on innocent people who were there to celebrate new year and have fun."

Some customers jumped into the waters of the Bosporus to escape the attack, the NTV report said.

Sinem Uyanik was inside the club with her husband, who was wounded in the attack.

"Before I could understand what was happening, my husband fell on top me," she said. "I had to lift several bodies from on top of me before I could get out. It was frightening."

Police with riot gear and machine guns backed up by armoured vehicles blocked the area close to the club, one of the most popular nightspots in Istanbul.

The White House condemned what it called a "horrific terrorist attack" and offered US help to Turkey.

Russian President Vladimir Putin sent Mr Erdogan a message, saying: "It is hard to imagine a more cynical crime than killing innocent people during new year celebrations. However, terrorists don't share moral values. Our common duty is to combat terrorists' aggression."

European Union foreign policy chief Federica Mogherini tweeted: "Our thoughts are with victims and their loved ones. We continue to work to prevent these tragedies."