Police raided a property in Sweden after seven people were attacked in a "possible terror incident".
A 22-year-old man understood to be an Afghan refugee who arrived in the country in 2018 was arrested in connection with the incident.
Swedish police were investigating the possibility of a terrorist motive after the attack in Vetlanda on Wednesday.
The suspect was taken to hospital after being shot in the leg by police after the mid-afternoon attack in the southern city of 13,000 inhabitants.
Police said the man had used a "sharp weapon", while local media reported that he had brandished a knife.
"We heard a scream from the street," Asa Karlqvist, owner of a florist shop, told local newspaper Vetlanda-Posten.
"Then we saw a man enter the store shouting that he had been stabbed. Blood was pouring from his shoulder, so we got towels and applied pressure on the wound."
Three of the victims have life-threatening injuries, while two are in a serious condition, said the local health authority in Jonkoping where they are being treated in hospital.
Regional police chief Malena Grann said the incident was being treated as "attempted murder" but "potential terror motives" were also being investigated.
The suspect was a resident of the area and previously known to police, but in the past had been accused of only "petty crimes", including cannabis use.
The extent of his injuries were unknown but police said they would question him shortly.
Swedish Prime Minister Stefan Lofven condemned the "horrific violence".
"We face these despicable actions with the combined force of the community," Mr Lofven said.
"We are reminded of how frail our safe existence is.”
Counter-terrorism co-ordinator at Sweden's Ministry of Foreign Affairs, Fredrika Ornbrant, said it was too early to say what the motive was.
"At this stage we do not know the reason for the attack but it really goes into the Swedish soul and it is highly regrettable," she said.
"Our thoughts are with the victims and their families."
Swedish intelligence services said the terrorist threat was high.
The country twice suffered attacks in recent years. In December 2010, a man carried out a suicide bomb attack in the centre of Stockholm in which some passers-by were slightly injured.
In April 2017, a radicalised asylum seeker from Uzbekistan drove into pedestrians in Stockholm with a stolen lorry, killing five people. He was sentenced to life in prison.
