Several militants wearing black dress entered Army Public School on Warsak Road and started indiscriminate firing.
A police official said that the school has been cordoned off, with a rescue operation in progress. About 500 students and teachers were believed to be inside at the time of attack.
Children and teachers are being evacuated and 18 injured students were shifted to Lady Reading Hospital, reports said, citing security officials.
The Lady Reading Hospital (LRH) has confirmed that at least two students have been killed as a result of gunfire.
However, local media reports put the figure at three.
Several students escaped through the back gate. One of students who escaped told Dunya TV that fourth period was in progress when they heard firing.
"First we didn't know what has happened. But late an army officer told us to escape through back gate," he said.
A spokesman for a Tehreek-e-Taliban Pakistan faction has claimed responsibility for the attack.
An official said that about six militants were involved in the attack. The attackers were wearing black uniforms.
Still hundreds of students were trapped inside.
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