People fled through the streets after rapid gunfire rang out in an area packed with restaurants and bars in the early hours of Sunday.
Police nearby responded to the gunfire and came across a “very large crowd”, police chief Katherine Lester said.
No suspect is yet in custody in the wake of the shootings.
“This is a really tragic situation,” Chief Lester said.
The officer said investigators had arrived at the scene and urged the public to come forward with any information that might help identify those responsible.
The shooting took place at around 02:00 (09:00 GMT) near the junction of 10th Street and K Street, in an area that leads to the Golden One Center, where the Sacramento Kings play basketball.
It is also only a few streets from the state Capitol building.
Pamela Harris said her daughter called her at 02:15 to say that her 38-year-old son, Sergio, had been shot and killed outside a nightclub.
“She said he was dead. I just collapsed,” Harris told Reuters at the scene of the shooting.
“I cannot leave here now until I know what’s going on. I’m not going anywhere. It seems like a dream.”
Kay Harris, 32, said she was asleep when one of her family members called to say they thought her brother had been killed. She said she thought he was at London, a nightclub on 10th Street, the Associated Press reports.
She said she has been to the club a few times and described it as a place for “the younger crowd”.
Community activist Berry Accius reached the scene at about 02:30 after a city council member called him about the shooting.
“The first thing I saw was like victims,” he was quoted as saying by CBS News.
“I saw a young girl with a whole bunch of blood in her body, a girl taking off glass from her, a young girl screaming saying, ‘They killed my sister.’ A mother running up, ‘Where’s my son, has my son been shot?'”
The incident is certain to inflame the ongoing debate about gun violence and the prevalence of lethal weapons in US society.
Mayor Darrell Steinberg tweeted that the numbers of dead and wounded were “difficult to comprehend”.
“Rising gun violence is the scourge of our city, state and nation, and I support all actions to reduce it,” he said.
In a tearful statement to reporters, city council member Katie Valenzuela – who represents the district where the shooting happened – said: “I’m heartbroken and I’m outraged.”
“Our community deserves better than this,” she said, pledging to do whatever she can so young people “don’t get shot down on K Street when they’re out trying to have a good time”.
Firearms are involved in approximately 40,000 deaths a year in the US, including suicides, according to the Gun Violence Archive website.