STRASBOURG, France - Hundreds of French security forces were deployed on Wednesday in the hunt for a lone gunman who killed at least three people and wounded a dozen others at the famed Christmas market in Strasbourg, with the government raising the security alert level and reinforcing border controls.

About 350 people, including police, troops and helicopters were on the heels of the attacker who had "sowed terror" in the city, Interior Minister Christophe Castaner said.

The killer opened fire at around 8 pm on Tuesday on one of the city's busiest streets, sending crowds of evening shoppers fleeing for safety. Castaner said the gunman had killed three people and wounded 12.

Soldiers patrolling the area as part of regular anti-terror operations exchanged fire with the suspect and wounded him, but could not stop him escaping, police sources said.

Castaner also said France had raised its security alert level to "emergency attack" with "the implementation of reinforced border controls and tightened controls on all Christmas markets in France to avoid the risk of a copycat" attack.

The gunman has been identified and was on a watchlist of suspected extremists, a statement from local security services said.

France's security forces, already on high alert after a series of terror attacks since 2015, are particularly stretched at the moment due to anti-government protests that have swept the country.

Shortly after the shooting, lines of police vehicles and ambulances streamed into the market area, under festive lights declaring the city the "capital of Christmas".

French President Emmanuel Macron on Twitter expressed "the solidarity of the whole nation" after holding a crisis meeting with cabinet officials in Paris.

Two separate security sources said on condition of anonymity that the shooter was believed to be a 29-year-old from the city, whose name was given as Cherif, and who was set to be arrested on Tuesday morning. He was being investigated over an attempted murder, one of the sources said.

The gunman cried "Allahu Akbar" ("God is Greatest") as he opened fire, France's anti-terror prosecutor Remy Heitz told a news conference on Wednesday, citing witnesses.

Four people connected to the main suspect were detained overnight in the eastern French city, he added.

"Shocked and saddened by the terrible attack in Strasbourg. My thoughts are with all of those affected and with the French people," British Prime Minister Theresa May said.

Security has been stepped up in recent years after a series of attacks in France by extremist gunmen and the Strasbourg market was long considered a possible target.

In 2016, a 23-year-old Tunisian killed 12 and injured 48 others when he plowed a truck into a Christmas market in Berlin in an attack claimed by the Islamic State terror group.

Three years after groups of extremists gunned down and blew up 130 people in Paris on Nov 13, 2015, French counterterror officials say their focus has shifted.

Rather than coordinated attacks, their main concern is attacks by "lone wolves"-self-radicalized individuals acting without links to terror groups such as the IS.