The police force for Spain's Catalonia region says five suspects who were shot and killed in Cambrils were carrying bomb belts, which have been detonated by the force's bomb squad.
Catalan police said the attackers were part of a group that had rammed into crowds and injured a number of people, including a police officer.
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Video shows horrific aftermath in Barcelona
Mobile phone video shows victims strewn across the pavement and police arriving at the scene after a van ploughs into a crowd of tourists in Barcelona on Thursday. WARNING GRAPHIC CONTENT.
Four of the suspects were shot dead when police responded. One suspect was injured and died a few hours later.
Cambrils is a coastal resort town 120 kilometres south-east of Barcelona.
Spanish authorities have linked the Cambrils incident to Thursday afternoon's van attack on a popular Barcelona promenade as well as an explosion in the town of Alcanar earlier in the day.
Spain's public broadcaster RTVE ran a video of Cambrils' promenade in which volleys of gunshots, wailing sirens and people's screams could be heard.
A regional government spokesman said, "The alleged terrorists were in an Audi A3 and apparently knocked down several people before coming across a police patrol and a shootout ensued."
Seven people, including one police officer, were injured. One person is in a critical condition and another is in a serious condition. The police officer suffered minor injuries.
Restaurant worker Markel Artabe, 20, said he saw someone lying on the ground "with a gunshot in the head".
A British man was hit by shrapnel in the Cambrils shootout, his friend Fitzroy Davis told the BBC.
"We were sitting at the bar and these girls ran in and some people started running past us," he said.
"One of our friends looked down the street and he says: 'Run.'
"The next thing is we see this guy coming running at us and someone shouted: 'Call the police, call the police.'
"He was running away at first then he turned round and he came running back up the street and he stopped and that is when the police car came and then they were shouting at him. And then he was walking around in a circle and then they shot him."
Video taken near the town's yacht club shows three bodies on the ground.
One person died when a house exploded in Alcanar, south of Cambrils, hours before the Barcelona rampage. A source has told police that explosives were being made in glass cylinders.
Catalan emergency services said on Twitter that people in Cambrils should "stay home, stay safe".
Stay safe Cambrils 😠https://t.co/m4irqfgNWX
— emma🕯 (@multixsuggs) August 17, 2017
Agencies
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