He said the gunman burst into the basement of the Tel Aviv Gay and Lesbian Association and opened fire on a support group for gay teenagers.
Police are searching the area for the gunman, who fled the scene, he said. Roadblocks were set up.
Rescue services said six of the wounded were badly hurt. "This was a hate crime, a premeditated attack," witness Yaniv Weisman told Channel 10 TV. He said Cafe Noir, the basement club, was popular with youth.
"Those hurt were very young," he said.
Openly gay Knesset lawmaker Nitzan Horowitz said it was "without a doubt the biggest ever attack on the Israeli gay community, we are all in shock."
Witnesses told Israeli media that the gunman was dressed all in black, and described the scene as a "bloodbath."
