Five people have been killed in the shooting in the central part of the town, a police spokesperson said, reports Bild.
Shots were fired near a youth shelter in the city centre, a police spokesman told the German news agency DPA.
Two suspects have been arrested, including the suspected shooter. The motive is unclear.
The police station is located near the crime scene, according to Bild. Police are urging the public to avoid the area.
The town of Stade in the German state of Lower Saxony has a population of around 48,000 and is located a few kilometres west of Hamburg.
According to police, there is no further threat to the public.
Germany has some of Europe's strictest gun laws, requiring everyone under 25 to undergo a psychiatric examination before applying for a gun licence, AFP reports. Mass shootings are relatively rare.
