State Highway 1 has been reduced to one lane in both north- and south-bound directions.
A worker at the Lagonda Milk Bar said the crash happened just outside their premises.
"We saw the ambulances arrive .. .they've taken everyone away. We've heard someone's passed away.''
The worker told the Herald two of her colleagues had seen part of the accident and were now speaking with police. They were too upset to speak about the incident to media, she said.
Another worker at the nearby LJ Hooker premises said they had seen "the aftermath'' and declined to comment further.
A number of businesses, restaurants, shops and accommodation premises are located on the busy street. Although police have blocked off part of the area, as they work at the scene, traffic is still flowing.
A staff member at the Oamaru Telegram business described the moment of the crash.
Sarah Baker said: "I was just on my computer here at work and I just heard a bunch of screeching and a bunch of bangs.
"I looked out and saw people getting out of their cars, running to the blue car.''
At least two other vehicles had been hit as well.
However, the occupants of those vehicles were okay, Miss Baker said.
An elderly man in the main vehicle involved, the blue car, was in a bad way though, she said.
Members of the public rushed to his aid; trying to get him out of the vehicle.
Miss Baker said she did not realise any pedestrians had been involved until being told.
