Armed police rushed to the Northern Quarter after someone spotted a 'man with a gun'.
Police were called to the scene on Dorsey Street at around 3.30pm on Friday afternoon.
A man has been detained in relation to the incident.
Officers later learned it was an imitation firearm the suspect was holding.
A statement read: "A man has been arrested on suspicion of possession of an imitation firearm.
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"Police have recovered what we believe to be an firearm from the scene."
Eyewitnesses have posted pictures of the scene on Twitter.
One man wrote: "Having a drink with missus in Northern Quarter.
Normal day in Manchester. Armed police outside, armed suspect in flats opposite."
