According to reports, the gunman, wearing a Santa Claus costume, killed a police officer and a civilian before he entered the club and opened fire at the people who were celebrating the New Year in Reina nightclub in the early hours of Sunday.
"A terrorist with a long-range weapon ... brutally and savagely carried out this incident by firing bullets on innocent people who were there solely to celebrate the New Year and have fun," Istanbul Governor Vasip Sahin told reporters at the scene.
Some 500 to 600 people are thought to have been present at the club when the attack happened. Some people jumped into the nearby Bosphorus Strait to avoid being shot and were later rescued by the police.
US president offers condolences
"This afternoon the president (Barack Obama) was briefed by his national security team on the attack in Istanbul," White House spokesman Eric Schultz said in a statement.
"The president expressed condolences for the innocent lives lost, directed his team to offer appropriate assistance to the Turkish authorities, as necessary, and keep him updated as warranted," he added.
Turkey has seen attacks on a host of targets over the past year and a half. Most of the bombing attacks have been blamed on the Daesh Takfiri terrorist group, Kurdistan Workers' Party (PKK) and other Kurdish groups.
On December 10, 44 people, mostly policemen, were killed and over 150 more injured in a twin bomb attack, during the second of which a bomber detonated his explosive belt as police arrived to surround him.
Russian's ambassador, Andrei Karlov, was also killed during the opening of a photo exhibition at a gallery in the capital Ankara on December 19. The assassin, an off-duty policeman Mevlut Mert Altintas was shot dead at the scene by police.
Back in June, at least 41 people were killed and some 240 more injured in a Daesh attack at Istanbul's main Ataturk Airport.
Turkey has also so been under a state of emergency since a failed military coup against the government in mid-July. Ankara has launched a heavy-handed crackdown against those suspected of having links with the coup plotters.