They said they saw a man dressed in black open fire with an automatic rifle, hitting up to 20 people. One witness said he heard "40 or 50" shots being fired.
Daniel Williams, a former member of the rock band The Devil Wears Prada, said he was in the bar at the time of the shooting.
"I am so incredibly heartbroken for those affected by this. I have never been so scared in my life," he told BNO News.
Speaking to the BBC, Jae Williams said he was at a nearby rap performance when they were told to evacuate.
"I was very shocked," he said. "We all evacuated quickly and safely. We were told to avoid the Oregon district.
"I got to my car, I could see cops, multiple ambulances. When I drove past I saw a lot of cops and ambulances."
Taylor Mayberry, who said she was inside the Ned Peppers bar when the shooting took place, told NBC News she hid in the bathroom as "tons of gunshots" were firing.
"I just heard a few gunshots and then saw everyone jumping to the ground," she said. "I've never experienced anything like that, so I dove to the ground and started running to the bathroom. I saw people trying to move toward the exit."
She said she was one of the last people to be let into the bathroom, where 10 others were already hiding. "We were holding the door shut and waiting until the gunshots stopped," Mayberry said.
"People were banging on the doors throughout. We weren't sure if they were…you know…we weren't sure if it was people getting in to shoot us or to get safe."
"All of our staff is safe and our hearts go out to everyone involved as we gather information," the bar said in a post on Instagram.
Dayton local and eyewitness James Williams said the incident took place at a bar called Ned Peppers, while he was seated in front of the patio.
In a video posted to Facebook, Williams said the active shooter had an AR-15. "He came up with an AR-15, had a vest on, earmuffs, and just started blowing bullets everywhere. I'm safe, there are casualties everywhere... they've taken ambulances of people everywhere. It's awful. I've never seen anything like this before."
Dayton's deputy police chief Matt Carper said the suspected shooter appeared to have fired with a long gun.
"Fortunately we had multiple officers in the immediate vicinity when this incident started," he told reporters. "For that we are very fortunate."
He added: "This is a very tragic incident and we are doing everything we can, to investigate it and try to identify the motivation behind this."
Police have asked local residents to avoid the area.
The Oregon District is home to several nightclubs, restaurants and art galleries.
The incident comes less than 24 hours after at least 20 people were killed in a mass shooting in El Paso, Texas, and less than a week after a gunman opened fire at a garlic festival in California, killing three people.
