According Istanbul Governor Vasip Sahin, one attacker shot a police officer and a civilian as he entered the Reina nightclub before opening fire at random inside. Some reports suggested there were multiple attackers.
Sahin told reporters, "A terrorist with a long-range weapon ... brutally and savagely carried out this attack by firing bullets on innocent people who were there solely to celebrate the New Year and have fun."
The attack again shook Turkey as it tries to recover from a failed July coup and a series of deadly bombings in cities including Istanbul and the capital Ankara, some blamed on Islamic State and others claimed by Kurdish militants.
The club, one of Istanbul 's most iconic, popular with locals and foreigners alike, overlooks the Bosphorus Strait separating Europe and Asia in the city's cosmopolitan Ortakoy district.
Turkish media reported that around 500 to 600 people were thought to have been inside when the gunman opened fire at around 1:15 a.m. (2230 GMT). Some jumped into the waters of the Bosphorus to save themselves and were rescued by police.
U.S. President Barack Obama, on vacation in Hawaii, expressed condolences and directed his team to offer help to the Turkish authorities, the White House said.
Istanbul Governor said that there was only one attacker but other reports, including on social media, suggested there may have been at least two, dressed in Santa Claus costumes which they later ditched.
According to Turk media, there were multiple attackers and that they shouted in Arabic.
An eyewitness stated that she managed to push through and get outside, describing seeing people soaked in blood and adding that there appeared to have been at least two gunmen.
Dozens of ambulances and police vehicles were dispatched to the club in Ortakoy, a neighborhood on the city's European side nestled under one of three bridges crossing the Bosphorus and home to nightclubs, restaurants and art galleries.
Security measures had been heightened in major Turkish cities, with police barring traffic leading up to key city squares.
In Istanbul , 17,000 police officers were put on duty, some camouflaged as Santa Claus and others as street vendors, Anadolu reported.
Ankara and Istanbul have been targeted by several attacks in 2016 carried out by the Islamic State group or Kurdish rebels.
The attacks have killed more than 180 people.