Two people were killed and 21 others injured in what may have been a gang-related shootout at a Toronto street party, raising fears of violent retaliation in Canada's largest city.

The second high-profile shooting in Toronto in less than two months that occured late on Monday evening killed a 14-year-old girl and a 23-year-old man. Police said a toddler was grazed by a bullet and is expected to recover, while one man was undergoing surgery and remains in critical condition.

"We are very concerned, not only with the quick resolution and solving of this crime, but of the potential for retaliatory violence," Toronto police chief Bill Blair said at a news conference, at which he promised to step up police presence in response.

"In my 35 years of policing, this is the worst incident of gun violence in my memory," he said.

'Gang fight'

Blair said there was a "strong indication" of gang involvement in the incident. Two people exchanged gunfire at the party, where police had previously responded to noise complaints. One of the injured has been taken into custody as "a person of interest".

The shooting took place in suburban Scarborough, about 20km east of downtown. One eyewitness told CityNews TV that the latest shooting took place at an annual barbecue block party that had been scheduled for Sunday and then moved to Monday after heavy weekend rainstorms. Police said hundreds of people were at the party when the shooting occurred.

The latest incident raises fears about gun violence in a city that takes pride in its relatively low crime rate compared with US urban centers. Canada has very strict laws controlling the use of handguns, and violent crime is usually rare.

Six weeks ago, two people were killed and six wounded in a gang-related weekend shooting at the downtown Eaton Centre, one of Toronto's top tourist destinations.

"I am shocked and disgusted by this senseless act of violence," Toronto Mayor Rob Ford said in a statement. Six weeks ago, he described the downtown mall shooting where two people died as an isolated incident.

"I can assure you, Toronto is not like Detroit," Ford told reporters on Tuesday.The murders were the 27th and 28th this year in Toronto. Detroit, a far smaller US city, had 184 murders by mid-July.