The Saturday morning shooting in Falls Township in eastern Pennsylvania forced the cancellation of a St Patrick's Day parade and shut down a children's theme park.
Authorities in Bucks County issued a shelter-in-place order for the area for several hours but it was cancelled by early afternoon.
Police said the suspect, a 26-year-old man who was currently homeless, knew the shooting victims.
Falls Township police said in a statement that the shootings occurred at two locations in the township.
The suspect then carjacked a vehicle and drove to Trenton, New Jersey, where he barricaded himself in a home with hostages.
Video from a WPVI helicopter showed numerous police vehicles surrounding several blocks of homes in Trenton, New Jersey, where the suspect is believed to be barricaded with hostages.
An officer roped off an area with crime tape while others took cover behind vehicles.
Philadelphia Governor Josh Shapiro has asked state police to assist local law enforcement agencies. (AP PHOTO)
Another officer was stationed behind a wooden fence in the back of one of the multi-level homes.
Middletown Township police said the suspect has ties to addresses in Bucks and Trenton and "stays in Trenton primarily".
Shaun Murphy, who lives in the Falls Township community of Levittown, said he was headed to the parade when he saw that the road had been blocked.
"All the neighbours were outside wondering what was going on and then we got the notice about shelter in place," Murphy said.
"I did see ambulances coming up the street earlier without their sirens on," Murphy said.
"My neighbours were just outside with me last night and we were just saying how great of a town and how great of a neighbourhood it is."
Governor Josh Shapiro said in social media posts that he has asked the Pennsylvania State Police to assist local law enforcement agencies.
Police said Oxford Valley Mall and Sesame Place had been told to close until further notice, and the area's Target store and other businesses chose to close as well.
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