Neighbours have been evacuated and the public are urged to avoid the area.
One terrified local told MailOnline they understood the man had cut a gas pipe and neighbours had been evacuated amid fears of an explosion.
Kathryn Guy said: "We live so close but we've been told nothing.
"No one has alerted us about the gas pipe that the perpetrator has cut we found this off neighbours.
"The adjoining road which is duchess street has heavy traffic which is right next to the incident. If there was to be an explosion God forbid."
A resident who was evacuated from her home as a precaution over a hostage situation in Shaw, Greater Manchester, has said police told them it was because of a gas leak.
esidents said they were woken up and told to leave the home because of a gas leak before police confirmed it was a result of a domestic incident.
One female resident, who asked not to be named, said: "We got evacuated at about 6:50am and told there was a gas leak and police incident. We thankfully came to my mum's who lives about ten minutes away.
"They wouldn't tell me more but I got the impression it was quite serious. We had to leave immediately. My partner said he heard someone shouting open up but thought they were trying to evacuate people. Now we believe it was probably aimed at the guy in the house."
Another resident said: "Someone has got his girlfriend held hostage and threatening to blow the gas up.
"There is police, ambulances and fire engines. I saw a dozen armed police surrounding the house and a man was shouting out the window."
Panicked evacuated neighbours have been taken in by kind-hearted pub manager Hannah Worthington, 21, who is looking after them at the Commercial Inn on Smallbrook Road.
Ms Worthington told MailOnline she was woken up by a member of staff asking if they could let the residents in for shelter and was now looking after around 20 residents.
She said it was usually a very quiet place to live and this was an unusual event.
She said: "I've just been making brews for people, trying to look after them. They've been out in the cold since around 6am this morning."
A police spokesman said: "Shortly before 3.15am on Tuesday, July 25, police were called to reports that a man armed with a gun had locked himself in an address on Pemberton Way in Shaw, Oldham.
"Officers are in attendance and are attempting to engage with the man at the scene.
"A woman and two children were reported to also be in the property however the children are now safely out of the address.
"As a precaution a number of nearby properties are being evacuated."
More to follow