Appeals court judge Giovanni Canzio told the official ANSA news agency that a defendant in a bankruptcy case opened fire at the entrance to a courtroom.
Bankruptcy court judge Fernando Ciampi was one of those killed, ANSA reported.
The gunman has been identified as Claudio Giardiello.
He is believed to still be at large inside the Palace of Justice.
The building was being evacuated, with women allowed to leave first, the Associated Press reported. Men are being let out after having their identification checked.
The sound of gunfire inside the Palace of Justice reportedly sparked panic, with hundreds of people pouring down stairways towards the exits while police and military police officers searched for the gunman.
Sky TG24 reported that the gunman was barricaded in an upper-floor room.
It was unclear how he managed to bring a weapon into the Palace of Justice, as visitors have to pass through metal detectors.
The building is in the centre of Milan, only a few streets away from the city’s cathedral and main shopping district.
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