The men were being held in custody to ensure there was no further escalation around the city, he said.
"We needed to act quickly to keep the peace and limit any damage or threat to the safety of the public," Mr Dickie said.
One of those involved in the confrontation - a senior Black Power member - was driven to Dunedin Hospital after being shot.
Mr Dickie said a 44-year-old Dunedin man was having surgery last night to repair nerve damage to his right arm.
Police believe a small-calibre rifle was used in the shooting, and a second weapon was allegedly used to damage a gang vehicle at the property - an incident which had further inflamed the situation, Mr Dickie said.
A white Subaru with a smashed front window remained parked outside of the property yesterday.
Police, including the armed offenders squad, began searching city streets for the occupants of two vehicles allegedly involved in the incident.
It has been two years since gang violence erupted in the city, when more than a dozen gang members were arrested and charged with a range of offences.
- OTAGO DAILY TIMES