Smoke billows from a 17-storey government building after a powerful explosion rocked central Oslo July 22, 2011. [Photo/Agencies]

OSLO - A bomb killed seven people in Norway's capital Oslo on Friday and a gunman opened fire at a youth camp on an island, police said.

Police said they believed the bombing and the shooting were connected, but could not immediately confirm Norwegian media reports that several people at been killed at the youth camp.

A Reuters witness said several army soldiers had taken up position around the center of the city.

With police advising people to evacuate central Oslo, apparently in fear of more attacks, Prime Minister Jens Stoltenberg told Norwegian TV2 television in a phone call that the situation was "very serious." He said that police had told him not to say where he was speaking from.

The bomb ripped through the main government building in the normally sleepy Norwegian capital in mid-afternoon, killing seven people, police said, and injuring many more.

"It exploded -- it must have been a bomb. People ran in panic...I counted at least 10 injured people," said bystander Kjersti Vedun, who was leaving the area of the blast in Oslo.

Shortly afterwards, a gunman opened fire at the island of Utoeya north-west of Oslo, where Stoltenberg's Labour party youth section's annual gathering was taking place.

Daily newspaper VG said on its website a man dressed as a policeman had been shooting wildly and had hit many people.

Norwegian commercial broadcaster TV2 said several people had been killed in the shooting spree.

There was no clear claim of responsibility and while the attacks appeared to bear the hallmarks of an Islamist militant assault, analysts said it was too early to draw any conclusions.

NATO member Norway has been the target of threats before over its involvement in conflicts in Afghanistan and Libya.

The attack came just over a year after three men were arrested on suspicion of having links to al Qaeda and planning to attack targets in Norway.

It came also less than three months after US forces killed Osama bin Laden in a raid on his hideout in Pakistan.

A Reuters witness said he had seen soldiers taking up positions around central Oslo, while police said they feared there might be explosives at the youth camp.

Violence or the threat of it has already come to the other Nordic states: a botched bomb attack took place in the Swedish capital Stockholm last December and the bomber was killed.