A man has been taken into custody in NSW after allegedly firing a series of shots in the street and entering a store, prompting a stand-off with police.

Police were called to the area in Windang, near Wollongong south of Sydney, just before 9.30am on Sunday and were told a man with two firearms had fired shots at passing vehicles and pedestrians.

He then barricaded himself inside a nearby dive shop along with the store owner, who was released safely.

A siege operation was activated with a number of roads closed and people urged to avoid the area.

Police established a perimeter around the shop and, after negotiation, the 40-year-old man surrendered and was arrested just before 10.30am.

They say there is no ongoing threat to the community. No injuries have been reported.

Footage on social media shows a masked man clad in black walking along Acacia Street, Windang, and firing at least one rifle shot into the air outside a real estate office.

The man remains in custody at Lake Illawarra police station, with crime scenes established at the dive shop and a Windang home.

-AAP