Cmdr. Guillermo Rivera of the Metropolitan Police said police were responding to a call of a man with a gun. As they approached the scene, they encountered people who said shots had been fired.
Rivera said there was no evidence that shots were fired.
Officers arrested a man for possession of a firearm that turned out to be a BB gun, according to a police report. Police had earlier said a handgun was found nearby.
The report says an officer observed people fleeing from the parade and someone pointed out the suspect, saying he had a gun in his bag. Police approached the suspect and discovered it was a BB gun, the report says.
Seven people were taken to hospitals with minor injuries, the commander said. Other people were treated at the scene, in Washington's Dupont Circle.
Police are reviewing recordings to try to determine what the noises were.
A reporter for CNN affiliate WJLA that he heard three or four very loud pops he thought were gunshots.
"You just heard people scream and they just started booking it," Tom Roussey said. He said with each pop more people panicked. "They're knocking over barricades. ... It was just chaos for a few moments."
The Capital Pride Alliance, which organized the event, said on its website that it expected more than 200 organizations to take part in the 1.5-mile parade. The parade featured floats and vehicles, organizers said.
After the chaos, Capital Pride tweeted that the parade was over but a block party would go on as scheduled.
The incident happened at about 7:20 p.m.
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