Dulwich Hill manhunt: Police release image of suspected gunman after car set alight in Sydney’s Inner West

Schools and local streets have been plunged into lockdown as police search for a reported gunman.

Police confirmed an operation was underway on Williams Pde in Dulwich Hill, in Sydney’s Inner West, about 10.15am on Friday.

Locals reported a fire billowing out of the underground carpark about the same time, with NSW Fire and Rescue confirming a car was found alight.

One fire truck was sent to the scene and extinguished the blaze about 10.50am.

Police had blocked off access to the surrounding area by the time the car was extinguished, a local told 7NEWS.com.au.

They said police were actively searching for a person but were unable to locate the suspect by midday.

Another reported a man had pointed a gun at people before running away.

People several blocks away were told by heavily armed police officers to leave the area for their safety. One witness told 7NEWS.com.au that officers were knocking on doors urging locals to not leave their homes.

Paramedics were also called to the complex but were stood down while on their way. No one is believed to have been injured.

7NEWS reports several schools in the area have also been placed into lockdown by the ongoing police operation.