A police spokesperson said there was some sort of altercation between two women known to each other.
A 23-year-old woman was taken into custody for possession of an offensive weapon and was due to appear in Whanganui District Court today.
A 26-year-old woman was injured in the incident and was flown to Whanganui Hospital for treatment with serious injuries.
Meanwhile, a 47-year-old man - who was unconnected to the original incident - made threatening comments to a police officer at the scene.
He was arrested and is also due to appear in Whanganui District Court today, on a charge of threatening to kill/do grievous bodily harm.
Local residents also believed a shooting had taken place, but a spokesperson said there hadn't been any firearm-related incidents in the town in the past 24 hours.
There was also a report of disorder on Grey St.
The incidents had shocked and angered locals.
One wrote, 'Where's the Christmas spirit ffs,' while another said 'man my kids ain't leaving to go riding on their bikes today'.