Two people are dead after a plane stalled and nose dived into Perth's Swan River during Australia Day celebrations as thousands of people looked on.

Police say two people died when the light plane, believed to be a seaplane, crash landed into the river just after 5pm local time.

It's believed only the pilot and a single passenger were on board. A man on the foreshore described the crash as shocking.

"It looked like it just broke in half as it hit the water. The sound as it hit the water was just shocking," witness Mal told ABC News.

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The crash was captured on video and posted to social media, along with dozens of comments from shocked onlookers.

The City of Perth says the Australia Day fireworks have been cancelled and people have been told to return home.