"Reports of shots fired in the vicinity of 26th and Michigan near Mercy Hospital. Avoid area. Heavy police response incoming," Chicago Police spokesman Anthony Guglielmi tweeted.
At least "one possible offender" had been shot at the hospital in the south side of America's third-largest city and there were "multiple" other victims, he added.
"A #ChicagoPolice officer has been shot in the active shooter incident at Mercy Hospital. He is in critical condition but receiving excellent care. Please send your prayers," Guglielmi later added.
TV footage showed people filing out of the hospital into a parking lot with their hands in the air. Patients described hearing shots ring out from the outside of the hospital as they waited inside.
One witness named by the local CBS television affiliate as Hector Avitia said he was with his wife waiting for test results when he saw a gunman dressed in black fire on someone on the ground multiple times in the parking lot.
He said the gunman was carrying a handgun with multiple clips.
"Then almost immediately, an officer was already coming in an SUV and he exchanged fire at them and then reloaded and shot the person on the ground again and then he made his way into the hospital and more shots were fired," another witness recalled.
- 'Scared as hell' -
James Gray told reporters that he saw the gunman and a woman walking together toward the parking lot, before he suddenly shot her three times in the chest.
"And once she fell to the ground, he stood over her and shot her three more times," he said, adding that the shooting played out "like a movie scene."
"They were walking and talking and he just turned around and started shooting. It wasn't a heated exchange. It was just like we're talking now," Gray said.
The shooting came less than two weeks after a gunman killed 12 people in a California music bar packed with college students.
That rampage followed the worst anti-Semitic attack in modern US history, when a gunman opened fire on worshipers at a synagogue in the US city of Pittsburgh on October 27.
The incidents have added to the growing outcry over gun safety in the United States, where there have been more than 300 mass shootings this year.
Bypassers across the street from Mercy Hospital spoke of hearing between six and nine gunshots that initially sounded like construction noise.
"I am scared as hell. I have never been so scared, I hear of shootings going on every day at people's workplaces, but not where I work at," an employee of the hospital's family clinic told the local ABC television affiliate.
Mercy, founded in 1852, has locations throughout Chicago and provides outpatient treatment and acute inpatient care, boasting doctors who are leaders in their field.
A hospital employee quoted by the Chicago Tribune said she was in her office when a notice came over a public address system telling those in the hospital to lock their doors.
"I don't know what happened," the unnamed employee told the Tribune.
"They told us to run, so we did."