The gunman, who is in custody, stood at the front of the theater and fired into the crowd about 12:30 a.m. MDT at a multiplex theater in a mall in Aurora.
ABC News is reporting that federal authorities have identified the gunman as local resident James Holmes.
"Witnesses tell us he released some sort of canister. They heard a hissing sound and some gas emerged and the gunman opened fire," Aurora Police Chief Dan Oates said at a news conference.
Police, ambulances and emergency crews swarmed on the scene after frantic calls started flooding the 911 switchboard, officials said.
Officers came running in and telling people to leave the theater, Salina Jordan told the Denver Post. She said some police were carrying and dragging bodies.
Officers later found the gunman near a car behind the theater.
"A gas mask, rifle, handgun at least one additional weapon (were) found inside," he said.
The suspect was taken into custody, but no name was released. Oates said there's no evidence of any other attackers. There was also no immediate word of any motive.
The suspect spoke of "possible explosives in his residence. We are dealing with that potential threat," Oates said
Police were at the Denver-area apartment and had evacuated other residents of the building. Oates did not say whether any explosives had been found.
He said police also checked for explosives in the parking lot and at the Century 16 theater and secured those areas.
Moviegoers spoke of their terror as violence erupted and people around them fell victim.
Bejamin Fernandez, 30, told the Post that he heard a series of explosions. He said that people ran from the theater and there were gunshots as police shouted "get down!"
Frenandez said he saw people falling, including one young girl.
Jordan told the paper that one girl was struck in cheek, others in stomach including a girl who looked to be around 9-years-old.
Jordan said it sounded like firecrackers until someone ran into Theater 8 yelling "they're shooting out here!"
Hayden Miller told KUSA-TV that he heard several shots.
"Like little explosions going on and shortly after that we heard people screaming," he told the station.
Hayden said at first he thought it was part of a louder movie next door. But then he saw "people hunched over leaving theater."
At least 24 people were being treated at Denver area hospitals.
Eleven people were being treated at the Medical Center of Aurora for gunshots and ranged from minor to critical condition. Two others walked in to be treated for tear gas contamination.
Denver Health had seven victims - one in critical and the rest in fair condition.
The youngest victim reported was a 6-year-old being treated at Children's Hospital Colorado, where a total of six victims were taken. Their condition wasn't known.
Two people in critical condition were rushed to nearby Swedish Medical Center, spokeswoman Nicole Williams said.
Aurora is on Denver's east side and is Colorado's third-largest city with 327,000 residents. It is home to a large Defense Department satellite intelligence operation at Buckley Air Force Base, as well as The Children's Hospital, the University of Colorado Hospital and a future Veterans Affairs hospital.
