The mass shooting took place inside a packed conference room located within Inland Regional Centre in San Bernardino, which assists people with developmental disabilities.
"We have a domestic terrorist-type situation here. The suspects were armed with long guns. They came prepared to do what they did, as if they were on a mission," San Bernardino Police Department Chief Jarrod Burguan told reporters at a news conference.
Hours later the police shot dead one of the three shooters fleeing on the SUV. There was exchange of fire between them.
"I know there is an active scene, there were shots fired and a suspect is down," Sergeant Vicki Cervantes of San Bernardino Police told reporters.
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A body could be seen near a bullet-riddled SUV, with dozens of police vehicles swarming around.
Burguan later tweeted that: "Suspects are down, one officer wounded. Details still unfolding."
He warned residents living near the scene of the police confrontation with the suspects to stay in their homes.
"The US has a pattern of mass shootings in the US that have no parallel anywhere else in the world. The needs to be changed, he said".
In a statement, California Governor Edmund Brown said his administration will spare no effort in bringing these killers to justice.
Noting that yet another American community is reeling from the horror of gun violence, Nancy Pelosi, the Democratic leader, said gun violence is a crisis of epidemic proportions in the US.
"I refuse to accept this as normal. We must take action to stop gun violence now," Hillary Clinton, the Democratic presidential, candidate said.
Leading Republican presidential candidate, Donald Trump, who was in Virginia started his election rally with a moment's silence in honor of the shooting victims.
The FBI said that so far, it was unclear if the shooting was a "terrorist incident.