A man has been arrested in relation to a firearms incident in Palmerston North.

About 4.40pm on Sunday, Roslyn residents were being urged to stay inside as armed offenders squad members used a loudspeaker to call on a man with a gun to surrender.

Police say the man refused instructions to come out of the property and tear gas was used at 8.45pm.

"The man exited the property and was arrested," a police statement said.

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The Herald understands the man with a gun was making threats.

One resident said police were using a loudspeaker to call on a man to surrender.

Another resident said he'd earlier seen armed police officers on the street, before police phoned his house and told him there was an incident taking place in the street and to lock his doors.

"They told us to stay inside and said it is not too far from where I live, on the other side of the road," he said.

The resident, who is a security guard and has lived in Clyde Cres for 35 years, said there had been firearms incidents in the street before.

He recalled armed police being called once when an air pistol was fired in a rental property and on another occasion when gunshots were heard in the area.

"That was a bit frightening when police were walking down the street in the dark all armed," he said.

He said today's incident was also frightening coming after the Christchurch terror attacks.

He also had his daughter and grandson and visitors in the house, all of whom have been told by police they cannot leave.

"You don't get too upset now when you are told you are in lockdown and you do what you are told," he said.

"You don't just take it lightly and think it is a bit of a joke.

"If someone in the street has got a weapon - well, we've got my grandson here and I don't want them leaving our property until we're told it is safe."

Another longtime Clyde Cres resident, living further down the street, said she could also see police cars and were in lockdown. Her son had earlier left the property and was now not being let back into the street.

The resident said the incident didn't seem close to her house and she was "calmly" waiting it out.