A fake gun has prompted a major police operation at a popular entertainment precinct in Sydney’s eastern suburbs.

Officers were called to the Entertainment Quarter at Moore Park about 4.45pm on Monday following reports of a man with a gun.

WATCH THE VIDEO ABOVE: Fake gun scare sparks police operation at Moore Park

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On arrival, police located two men, one of whom was allegedly wearing a bulletproof vest and carrying what appeared to be a firearm.

A photo from the scene appeared to show a man wearing a bulletproof vest bearing an American flag, with what appeared to be a gun attached to his chest, sitting outside a restaurant.

A man was seen in a bulletproof vest bearing an American flag. Credit: 7NEWS

A witness described the scene to 7NEWS as “terrifying”.

“We saw a gun on his chest, but we were like, ‘Is he wearing a costume? Is it real?’ It looked like a pistol,” she said.

“I’ve never seen anything like that happen in real life, so it was terrifying.”

Footage from the scene shows a significant police presence, with about 20 police vehicles at the Entertainment Quarter.

Two people were arrested. Credit: petedeppeler/Instagram

A major police operation is underway at Sydney Entertainment Quarter. Credit: petedeppeler/Instagram

Two men, aged 39 and 35, were arrested and a replica firearm, a vest and a badge were seized.

Both men were taken to Surry Hills Police Station for questioning.

Police confirmed there was no ongoing threat to the public.

Anyone with information, CCTV or mobile phone footage is urged to contact Crime Stoppers.

A replica firearm, a vest and a badge were seized. Credit: NSW Police