Police in the Norwegian capital of Oslo evacuated a busy nightlife street in the city centre after finding an explosive device.

Bars and restaurants were cleared before bomb disposal experts safely detonated the small-scale device, while a suspect has been taken into custody.

Police chief Vidar Pedersen confirmed the device, initially described as "bomb-like," was an explosive as the police Twitter account announced it had been neutralised.

A witness described frantic scenes as police ordered the public to retreat to safety after the discovery on a street just outside the central Groenland underground station.

"Every restaurant was being closed," Malin Myrvold, 23, told Reuters after seeing the operation from a fourth-floor window.

"You could see cops in heavy armour going in every store and restaurant," she said.

"We were trying to see what was going on. The police were screaming at us to get back inside and stay where we were."

Police earlier said on their official Twitter account they believed the device "only (had) potential for causing limited damage".

No details have yet been given about the suspect.

The discovery came a day after Norwegian police confirmed armed officers would patrol the country's biggest cities following Friday's suspected terror attack in the capital of Scandinavian neighbours Sweden.

Police said they will carry weapons "until further notice" in the wake of the lorry crash in Stockholm, which killed four people and wounded 15.