Police Commissioner Mike Bush said there are multiple casualties and one person has been arrested.
Christchurch City council said in a statement: "In response to a serious ongoing incident we're locking down number of central city buildings, including the Civic Offices and Central Library".
Another eyewitness said people are being evacuated from near a second mosque in Christchurch and police are swarming the area.
Soon after they were barred from getting off the bus, the players escaped and ran through Hagley Park.
Officers have reportedly also cleared Cathedral Square, where thousands of children were holding a rally for action on climate change.
New Zealand Prime Minister Jacinda Ardern called the unfolding incident one of the country's darkest days.
You can receive Breaking News on a smartphone or tablet via the BBC News App. It is believed that there were 300 people inside the mosque at the time of the shooting.
A witness has said that the shooter was dressed in military gear and had a high-powered rifle.
'Shots fired' near mosque in New Zealand
"I acknowledge that that may mean that some families are separated but please continue to listen out for information as it comes to light that's been directly provided by the New Zealand Police with further information", she said.
"They were devastated and terrified and I saw guys who were from the mosque covered in blood sitting in ambulances".
All schools and hospitals in Christchurch have been placed in lockdown.
Armed police patrol outside a mosque in central Christchurch. An act that has absolutely no place in New Zealand. "What has happened is an extraordinary and unprecedented act of violence".
Another witness said the man was wearing a helmet.
"I heard a big sound of the gun".
"When that was happening, one of the players had called me to contact the police".
Sabir Hussain, who was inside Linwood Mosque, said he was "doing a prayer when our Imam (the leader of a mosque) said our brothers have been shot". Lots of people were sitting on the floor.More news: UK Parliament votes against no-deal Brexit
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