Police arrested a driver on suspicion of attempted homicide after 30 people were injured when a car ploughed into a carnival procession in the central German town of Volkmarsen on Monday.
A spokesman for North Hesse police told German newspaper Bild they could not rule out the possibility of a deliberate attack.
State broadcaster Hessischer Rundfunk quoted a witness who said the car made its way around safety barriers before accelerating into the crowds gathered to watch the parade.
The car drove 30 metres into the crowd before coming to a stop.
A third of the injuries are believed to be serious and many of those hurt are believed to be young children.
Police said the driver was a German national, aged 29.
The suspect has been arrested on suspicion of attempted homicide. Investigators were not assuming the attack was politically motivated.
Social media users posted images of emergency services attending the scene in large numbers.
A helicopter and dozens of ambulances were called to the scene. Witnesses reported seeing emergency services treating injured people.
"This is a terrible day, this is a terrible deed," said Peter Beuth, interior minister of Hesse, the western state where Volkmarsen is located.
Mr Beuth said eight to 10 of about 30 people injured were seriously hurt.
"Among those who are seriously injured are children, unfortunately," he said.
Bild newspaper reported that some of the injuries were life-threatening.
One photo that was circulating on social media appeared to show the arrest of the perpetrator.
But Nordhessen Police later tweeted to denounce the image as "fake news", saying that it did not show the suspect.
In many parts of Germany residents are celebrating Rose Monday, a highlight of the annual carnival festivities that sees adults and children dress up and attend parades where people play music and throw sweets from floats.
Police in North Hesse cancelled all other parades due to take place in the state "as a precaution".
They urged the public not to speculate about a possible motive for the incident and cautioned against sharing videos and pictures online.
Germany is still reeling from a shooting spree in the city of Hanau, in the same state of Hesse, in which 10 people were killed last Wednesday.
The gunman, who left behind a racist letter, first opened fire at a shisha bar and a cafe, killing nine people, before shooting dead his mother and himself.
The deadliest terrorist attack in Germany's recent history happened in 2016 when an assailant following instructions from ISIS drove a truck into a busy Christmas market in Berlin, killing 12 people and injuring more than 50.
ISIS later released a video of the attacker, Anis Amri, pledging allegiance to then leader Abu Bakr Al Baghdadi.
