The incident follows after a series of attacks in Europe by people using vehicles as weapons.
"Police received a call from SOS Alarm that a person in a vehicle has injured other people on Drottninggatan," police wrote on Twitter.
The incident occurred just before 1300 GMT at the corner of the Ahlens department store and Drottninggatan, the city's biggest pedestrian street, above-ground from Stockholm's central subway station.
Thick smoke was rising from the scene, while video images showed an area blocked off by police and crowds gathering around the police cordon.
Helicopters could be heard hovering in the sky over central Stockholm, and a large number of police cars and ambulances were dispatched to the scene, witnesses said.
While it was unclear whether the incident was an attack or an accident, it follows after a series of attacks in Europe by people using vehicles as weapons.
The worst attack was last year in France on the Bastille Day national holiday of July 14, in which a man rammed a truck into a crowd in the Mediterranean resort of Nice, killing 86 people.
He was shot dead by police, and the Islamic State group claimed responsibility.
Last month, Khalid Masood, a 52-year-old convert to Islam known to British security services, drove a car at high speed into pedestrians on London's Westminster Bridge before launching a frenzied knife attack on a policeman guarding the parliament building.
The incident killed five people, while Masood himself was shot dead by police.
And in December, a man hijacked a truck and slammed into shoppers at a Christmas market in Berlin, killing 12 people.
That attacker was shot dead by police in Milan four days later, and the rampage was claimed by the IS.
In 2014, IS spokesman Abu Mohammed al-Adnani called for attacks on citizens of Western countries and gave instructions on how they could be carried out without military equipment, using rocks or knives, or by running people over in vehicles.
There have also been false alerts, however.
Earlier Friday, Belgium dropped terrorism charges against a driver who sped into a crowded shopping area in Antwerp last month, which sparked fears of a copy-cat terror attack.
However, the driver, a Tunisian man identified as Mohamed R., remained in custody on a weapons offence related to the incident, the federal prosecutor's office said.