Around 30 people were attending the birthday barbecue when the shooting happened shortly after midnight, Indianapolis police Lt. Jeff Duhamell said. A motive was not immediately known.
A man and a woman died at the scene and six people were taken to the hospital in stable condition, including one partygoer who had been shot in the neck and another who was shot in the back, Duhamell said.
CBS affiliate WISH in Indianapolis reports the man and woman, who police say were in their late 20s to early 30s, were found dead at the scene, their bodies lying in the yard.
"We're talking at least 25-30 rounds from a high-powered rifle, so although eight people were shot, it could've been a lot worse," Duhamell said.
He did not have details of the firearm used in the attack except that it was an assault-style rifle, "an AK or SKS."
Duhamell said the gunman had been wearing a ski mask, and that he fired from the street and then a car before fleeing. It wasn't clear if a getaway driver was also involved.
The shooting left shell casings scattered across 32nd Street in a neighborhood between Interstate 65 and the White River.
Duhamell said it was possible some shots were fired toward the gunman. "We're still checking with our forensics people and trying to find out exactly what happened," he said. "We do know that multiple rounds were being fired from the roadway toward the house."
Investigators say they found a silver Dodge Charger at Clifton and Congress riddled with bullets. They believe the car belongs to one of the victims. They add that they are looking for a Chrysler 300 vehicle that they believe belongs to one of the suspects.
Meanwhile, shocked and scared neighbors expressed their dismay over the shooting.
"The neighborhood is over. It just makes me feel like the neighborhood is over. We've been living here for 50 years and never had anything like this," said one neighbor.
Mayor Greg Ballard said he was disgusted by the shooting and that it marred what had mostly been a peaceful summer in the city. "It is a tragic shooting obviously with people just having fun," he said. "It makes me very angry when people do this and ruin the peace of our city."
Police do not yet have a motive for the shooting.
Duhamell said police officers had been investigating reports late Monday of a man carrying an assault rifle in the neighborhood, but had found no one. He said it wasn't immediately clear if there was a connection with the shooting early Tuesday.