Multiple gunshots were fired by the attacker near a synagogue and then in a kebab shop in the areas of Ludwig-Wucherer-Strasse and Humboldstrasse, which are about a 5-minute walk away.
The shooting began around noon local time, an eyewitness told ABC News. The suspected attacker fled the scene in a car towards south of Halle and was arrested outside the town at around 3:30 pm local time. A video of the shooting was reportedly posted online.
The unnamed victims were one male and one female, and police said the male is thought to be a "visitor" to the local area.
Police gave no further details about the target of the attack, although they did not rule that more people could have been involved. Federal prosecutors, who usually handle cases involving suspected terrorism or cases dealing with national security, have now taken over the investigation.
It is unknown how many people were inside the synagogue at the time of the incident, but the head of Halle's Jewish community, Max Privorotzki, told Der Spiegel that he estimated there were about 70 to 80 people inside.