Rescue services said that six of the wounded during the incident on Saturday were badly hurt.
The shooting took place at the headquarters of the local lesbian and gay rights association on Nachmani street.
Micky Rosenfeld, a police spokesman, said the attack was "most likely a criminal attack and not a terror attack," while representatives of Tel Aviv's gay community said it was a homophobic attack.
Police are searching the area for the gunman, who fled the scene, Rosenfeld said.
Israel Channel 10 TV reported that the incident occurred at "Cafe Noir", a popular hangout frequented by the gay community in downtown Tel Aviv.
The station said that a man dressed in black entered the club and began shooting indiscriminately.
The report described the scene as a "bloodbath".
Police have ordered the temporary closure of all gay clubs in the Israeli city.