Police believe a shotgun was used in the attack, which left victims with predominantly pellet-based leg injuries.
All 10 injured people – ranging in age from “late childhood to 50s” – were sent to hospital, among them two children with “pellet-type wounds”.
One man was said to be in a serious but stable condition with leg injuries.
Police say one person has left hospital after self-discharging, and the remaining nine people with pellet injuries are expected to leave hospital on Sunday.
Armed and unarmed officers were on the scene “within a minute” after a series of “bangs” were reported at 2.25am in Claremont Road.
On arriving at the scene, they discovered a crowd of several hundred people who had been at Manchester Caribbean Carnival, some of whom had been injured and needed first aid.
Chief Superintendent Wasim Chaudhry described the situation as “confusing” and “distressing”.
The carnival had brought large groups of people to the area, with several after-parties understood to have taken place in Claremont Road.
The event – which this year is celebrating the 70th anniversary of the Windrush generation – is going ahead as planned on Sunday.
Festival organiser Mike Bisson called the shooting “an isolated incident” and said it had “nothing to do with the carnival”.
Chief Superintendent Chaudhry called the shooting “a reckless act that could have had devastating consequences”.
He added: “Guns have no place on our streets and we want to assure you we are doing everything we can to find the person or people responsible.”
Councillor Pat Karney highlighted the community spirit in the area, saying: “It’s an individual, an idiot, who was messing around with a firearm and you can’t tar a whole community because of some idiotic behaviour.”
He also said the man who had suffered a leg injury was understood to have broken his limb while “attempting to flee the incident”.
Claremont Road runs for about two miles through Moss Side.
The area has numerous gang territories and has long had problems connected with drugs and gun violence.
Footage reportedly showing the aftermath of the incident was posted on Twitter, with the caption: “Shooting at Manchester Moss Side post carnival street party.”
The dark video appears to show a panicked group of people being helped by police.
As a voice cries out, shouts of “move” can be heard, while another voice asks “can you hear me?”.
“Give us some space guys” can also be heard in the background, while another voice says “are you dumb?” as the camera pans around.
Detective Superintendent Debbie Dooley said: “We currently have a number of people in hospital all being treated for different injuries but thankfully most do not appear to be life-threatening at this time.
“Officers are trying to establish exactly where this incident took place and who is responsible for such a dangerous attack.”
Wayne Everett, a local DJ who attended the carnival, told Sky News: “The atmosphere was nice, but it’s Moss Side isn’t it? You just don’t know what can happen. It seemed like there was a general understanding over the last few years that everyone would just behave themselves.”
Going on to describe Moss Side as “a volatile area”, he said police should not have allowed the carnival to go ahead.
He said: “It’s only a matter of time. You can’t have thousands of youths in the area in the early hours of the morning just doing what they want. It’s common sense.
“As someone from the area, I decided to come down and see this thing, because 10 people is a major thing in Manchester.”
Officers and forensic experts are now on the scene.
Superintendent Dooley said: “The area is being searched and examined while we are also trying to speak to as many people as possible and are reviewing CCTV to get all the facts.”
Extra police have been sent to the area, which is around two miles south of Manchester city centre.
:: Anyone with any information should call police on 0161 856 4166 quoting incident number 297 of 12 August or the independent charity Crimestoppers anonymously on 0800 555 111.