A former resident of Highland Park described the area as a typical Jewish middle-class suburb, with Kosher butchers, supermarkets and synagogues.
He told The JC: "It's the last place you'd expect something like to happen, it's the sort of town you can walk home at 3am in and never worry."
Parade-goers are believed to have mistaken the shots for firecrackers at first.
A lone gunman is said to have been stationed on the roof of a clothing store firing at people in the crowd.
Police and FBI officers patrol the streets of Highland Park Illinois after a mass shooting in the Chicago suburb (Getty Images)
Some witnesses have described bodies left lying in the street along the route.
About a third of the 30,000 residents are Jewish in Highland Park, a suburb by Lake Michigan about 25 miles north of Chicago.
The Jewish Telegraph Agency (JTA) reported that Jewish victims were among the casualties, according to a Chicago area law enforcement source.
Local kosher grill owner Tomer Mizrahi told JTA: ”We used to think this was a safe place. That feeling of safety is now gone."
The suspected gunman remains at large. Authorities have so far declined to speculate on the motive for the shooting.
Prime Minister Yair Lapid has spoken with the Israeli Consul General in Chicago, Yanam Cohen who updated him on potential Jewish casualties.
In a statement, Lapid said: "A holiday has become a tragedy. My thoughts are with the families of the victims and the entire American people. Today, as always, Israel stands by the United States."
The mass shooting is believed to be at least the 250th this year in the US.