"The male driver got out of the car and ran towards Exeter Cres, and a police dog handler got out of the police car and went in pursuit.
The witness said a young woman then "crawled out of the back of the car" and attempted to act as a bystander.
"I called police and they came and arrested her."
The front windscreen of the car was smashed and there was also damage to both sides of the vehicle.
Police confirmed a woman had remained near the car and had been arrested. Two men had run from the crash through properties on Mahoe Ave.
Cordons were set up around Kowhai Ave, Featherston St, Karamu Ave and Mahoe Ave, and residents were told to stay indoors.
Senior Sergeant Steven Crawford said armed police cordons were set up because "it was believed one of the occupants that fled may have been in possession of a firearm".
"A firearm and ammunition were later recovered from the vehicle."
Police officers could be seen searching homes and dogs had been brought in this afternoon.
The woman and one of the men have now been arrested but the second man is still on the run, police said.
Residents returning to the area have been allowed back into their homes after a two-hour wait. Police have thanked the public for their patience as officers searched properties in the area.
Anyone who saw anything suspicious is asked to call police on 111.
