About 10 pm yesterday, a person produced a gun and shot the two people during the Muses parade, police spokesman Frank Robertson said.
A suspect was in custody, and a weapon was recovered nearby. Police didn't release any other details.
Angela Matherne was taking in the parade the traditional kickoff to Carnival weekend with family when the shooting happened a block away. Matherne told The Associated Press that she didn't hear anything "but saw people running in our direction and police in the opposite."
Officers stationed nearby responded immediately and barriers were set up, but the parade continued, The New Orleans Advocate reported.
One victim was struck in the chest and died in surgery, Robertson said. The other was struck in the neck and was in the hospital.
The city will host several parades daily through Mardi Gras, which is Tuesday.