At least five people are dead after a car ploughed into a Christmas parade in the US state of Wisconsin.

Police say more than 40 others have been injured n the incident in the city of Waukesha, around 20 west of central Milwaukeee.

Witnesses say the red SUV drove into the crowds at speed, hitting children’s dance teams and marching bands.

Police Chief Dan Thompson said a “suspect vehicle” had been found and that a “person of interest” was in police custody.

Investigators are considering the possibility the driver was involved in an earlier incident involving a knife and was fleeing when the car reached the parade.

Eleven adults and 12 children were taken to hospital after being hit by the vehicle and Mr Thompson confirmed there were "some fatalities".

“The vehicle struck more than 20 individuals,” he said.

“Some individuals were children and there were 20 fatalities as a result of this incident,” he said.

“An officer did discharge his weapon at the suspect’s vehicle to try to stop the vehicle.”

No one was injured by the police gunshots.

One video showed a woman screaming, “Oh my God” repeatedly as a group of young dancers was struck, while a father described going from “one crumpled body to the other” in search of his daughter.

This woman heard the commotion from her window.

“It was just absolute chaos; people screaming” she said.

“I immediately ran downstairs outside of my apartment and I could see kids just lying on the streets, people putting blankets over them trying to attend to them and kids screaming on the sidewalks.”

Another woman told Milwaukee's Fox6 TV station that the SUV hit a dance team of girls aged between nine and 15-years-old.

She said there was initially silence, followed by screaming, running, and efforts to check on those injured.

Waukesha mayor Shawn Reilly said the community was experiencing a “horrible, senseless tragedy.”

“I walked in the parade at the beginning," he said at a press conference.

“I saw the happy children sitting on the curb. I saw happy parents behind their children. I can still see the smiling faces. A parade is a celebration for our community.”

“I'm deeply saddened to know that so many in our community went to a parade, but ended up dealing with injuries and heartache.”

The White House said it had reached out to state and local officials to “offer any support and assistance as needed.”