The incident occurred in the southern Belgium village of Strepy-Bracquegnies, which is 30 miles south of Brussels, at around 4am when a group of about 150 people gathered ahead of the annual carnival.'At this stage, there are no elements to suggest that the attack had a terrorist motive,' prosecutor Damien Verheyen told a news conference.
Police denied media reports the car was involved in a high-speed chase.
Jacques Gobert, mayor of the neighbouring town of La Louviere, said between 150-200 people were gathered to get ready for the annual folklore parade, involving costumes and drums, when the vehicle appeared.
He told RTBF radio: 'A car drove from the back at high speed. We have a few dozen injured and unfortunately several people who are killed.
'The driver was intercepted as he tried to get away. The cause of the incident or whether the crash was intentional has not yet been determined.'
A spokesman for the local emergency services said: 'An early morning carnival opening ceremony was taking place, when the car approached a crowd in what looked like a deliberate attack.
'The driver tried to get away, but was arrested by the police. He is currently in custody.'
Belgian Interior Minister Annelies Verlinden said an examining magistrate has opened a criminal enquiry, and no motivation was being ruled out. The injured have been rushed to La Louviere hospital, and many have been placed in intensive care.
Belgian Prime Minister Alexander De Croo deplored the 'horrible news' in which 'a community gathering to celebrate has been hit in the heart', he wrote on Twitter.
De Croo was to visit the scene later on Sunday accompanied by Belgium's King Philippe, the prime minister's office said.
'Deepest condolences to the families and friends of those killed and injured in the incident this morning', said Belgian Interior Minister Annelies Verlinden.'What should have been a great party turned into a tragedy. We are monitoring the situation closely.'
'We heard an immense noise...and the car literally went into the group of people,' said Bel RTL reporter Fabrice Collignon, who witnessed the event.
A witness, who gave his name as Theo, told RTBF News: 'I was walking by. I turned around and saw a car running into the troop. It came very fast and didn't brake. It continued and it took a girl 100 metres further.'
Video taken from the scene before the incident appeared to show locals setting up the carnival during the early hours of Sunday morning. RTBF quoted local authorities as saying 15 also suffered light injuries in the incident.
'This Sunday morning, a vehicle collided with... a group of around 100 people which had just left the sports hall to go back up to the centre of the village,' the mayor's office said in a statement.
The public prosecutor's office did not wish to communicate on the case for the time being, but will speak later in the day, it said.
Local councillor Xavier Papier said: 'What was supposed to be the return of the joy of partying together turns into a horrible tragedy.
'This morning, we are all linked to Strépy-Bracquegnies, to the bereaved families and to the wounded by this horrific act.'
Olivier Destrebecq, another local councillor, said: 'horror and dread has this morning surrounded the Strépy-Bracquegnies carnival.
'Appearing out of nowhere, a car speeded into the crowd that had gathered. A heartfelt thought for these people and their families.'
And MP Sophie Pécrials said: 'I have no words! It was meant to be a Sunday of celebration, reunions, and smiles. Now it's a black Sunday for everyone in the region.'
Authorities are to hold a press conference at 11am in La Louviere.