A police operation is underway in the Central West NSW town of Lake Cargelligo. (ABC News)

Three people have been shot dead in the Central West town of Lake Cargelligo, with reports the gunman is still at large.

Emergency services responded to reports of the shooting on Walker Street, near Yelkin Street, about 4:40pm on Thursday.

Police confirmed that three people, two women and a man, had died.

Another man has been taken to hospital in a serious but stable condition.

A crime scene has been established and an investigation into the circumstances of the incident has commenced.

Earlier, police sent out a geo-targeted SMS that covered the whole town, which included a message telling people to stay inside or to avoid the area.

“There should be people staying inside right now,” a police spokesperson told the ABC.

“We will be throwing everything at it that is available.”

Independent MP and the member for Barwon, Roy Butler, said it was “tragic news” out of Lake Cargelligo.

“It’s a terrible situation, and it’s still live, so we don’t have much information. My thoughts are with the victims and their families,” he said.