A state of emergency has been declared in Orlando and statewide after the shooting.
50 people were killed inside the Pulse nightclub and at least 53 people were injured, police say.
"It appears he was organised and well-prepared," Orlando Police Chief John Mina said. The shooter had an assault-type weapon, a handgun and "some type of (other) device on him."
Orlando authorities said they consider the violence an act of domestic terror and the FBI is involved in the probe.
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While investigators are exploring all angles, they "have suggestions the individual has leanings towards (Islamic terrorism), but right now we can't say definitely," said Ron Hopper, assistant special agent in charge of the FBI's Orlando bureau.
At least one Senator has also described it as an act of terrorism. President Barack Obama, who was briefed this morning by Lisa Monaco, his Assistant for Homeland Security and Counterterrorism, is personally monitoring the situation. The shooting is being investigated by the FBI.
"Our thoughts and prayers are with the families and loved ones of the victims," White House Press Secretary Josh Earnest said. The shooting started a couple of minutes after 2 am. The alleged shooter identified as Omar Siddique Mateen was killed. CNN reported he had pledged allegiance to IS at some point.
The deadly incident started over a three hour period, beginning at around 2 am (0600 GMT) when shots were fired amid the loud music at the Pulse Orlando gay nightclub.
Police said the shots were fired by a gunman armed with an assault rifle and a handgun.
"The suspect at some point went back inside the club where more shots were fired. This did turn into a hostage situation," Mina told reporters adding "At approximately 0500 hours (0900 GMT) this morning, the decision was made to rescue hostages that were in there".