The Los Angeles Times quoted a law enforcement official as saying at least 30 shots had been fired and that there were casualties.
Authorities said the incident took place at the Borderline Bar & Grill - though the extent of the injuries is not yet known.
The gunman shot a security guard standing at the front of the bar before entering the building.
Reports say the suspect, who is described as wearing dark clothing, may have used smoke grenades as well as a gun in the attack.
A SWAT team have been pictured surrounding the venue in their formations.
It is thought the gunman may still be at large and at least police officer is injured.
Officers later reported a man matching the suspect's description on the ground at the scene outside a window.
He told reporters: "When our deputies arrive on the scene they attempted to neutralise that threat, I can't tell you if it was neutralised or not".
Victims rant to a nearby petrol station to get medical help.
A witness told KABC-TV that there were many young people "having a great time" in the bar when a man entered and "started shooting".
"With over 2,500 square feet of wide open dance floor, Borderline has provided a haven for country line dancing folks of all ages equiped with pool tables", the website said.
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