Andre Scheie says he saw bodies on the shore of the Utoya island where the youth wing of the Labor Party was holding a summer camp for hundreds of youths.
Scheie said today: "There are very many dead by the shore ... there are about 20-25 dead." He also said he saw dead people in the water.
"I saw a lot of people running and screaming, I ran to the nearest building and hid under a bed," Emilie Bersaas, 19, told Britain's Sky News.
"It was very terrifying. At one point the shooting was very very close to the building, it actually hit the building, the people in the next room screamed."
"It is kind of unreal, especially in Norway," Bersaas said. "This is something we hear about happening in the US." Police said they had detained the gunman and that his identity was known, but refused to say if he was a Norwegian citizen.
Local media quoted witnesses describing the gunman as northern European and armed with an automatic rifle, but the reports were not confirmed. Norwegian police said they feared there could also be explosives on the island.
Reports of the island shooting emerged shortly after a blast tore through the government quarter in central Oslo, home to the prime minister's office, other ministries and some of the country's leading media.
Police said a "bomb" had been behind the "powerful explosion".
Stoltenberg was safe and there were no reports of other senior government officials being killed or wounded. The government was to hold a crisis meeting later today.
"We can confirm that we have seven dead and two have been seriously injured" in the bomb attack, a police spokesman told reporters at a briefing in Oslo. Several dozen were also wounded, police said.
"We have no main theory, we don't even have a working theory," a police official said separately. "We already have enough to do to get an understanding of the situation."
Police did say however that they believed the two attacks were connected.
"There are good reasons to believe that there is a link between the events," police commissioner Sveinung Sponheim told reporters in Oslo.
Police also said that the gunman was probably linked to the bombing. Oslo's mayor Fabian Stang said the capital was struggling to come to terms with the idea that it had joined the list of cities targetted by bombers.
"Today we think about those people living in New York and London who have experienced this kind of thing," he told Sky.
"I do not think it is possible for us to understand what has happened today but hopefully we will be able to go on and that tomorrow Oslo will be a peaceful city again." Images on Norwegian TV showed the prime minister's office and other buildings heavily damaged, sidewalks covered in broken glass and smoke rising from the area.
A police spokesman said a vehicle had been seen driving at high speed in the area just before the explosion but did not confirm that the blast had been caused by a car bomb.
Police had sealed off the area and urged residents to stay in their homes.
Stoltenberg gave a telephone interview to show that he was unharmed after the deadly blast, which he called a "serious situation".
"Even if one is well prepared, it is always rather dramatic when something like this happens," he said in the interview with a Norwegian TV station.
Norway's intelligence police agency said in February that Islamic extremism was a major threat to the country, describing it as "our main priority and our main concern"