A gunman opened fire at the church youth performance Sunday, killing two people, including a man witnesses called a hero for shielding others from a shotgun blast.
Seven adults were also injured but no children were harmed at the church. Members said they dove under pews or ran from the building when the shooting started.
Congregants tackled the gunman.
Jim D. Adkisson, 58, was charged with first-degree murder and held on $1 million bail, according to city spokesman Randy Kenner, who did not know if Adkisson had an attorney.
The slain man was identified as Greg McKendry, 60, a longtime church member and usher. Church member Barbara Kemper told The Associated Press that McKendry "stood in the front of the gunman and took the blast to protect the rest of us."
Linda Kraeger, 61, died at the University of Tennessee Medical Center a few hours after the shooting, Kenner said.
Five people remained hospitalized, all in critical or serious condition. Two others were treated and released.
The gunman's motive is not yet known. The church, like many other Unitarian Universalist churches, promotes progressive social work, such as desegregation and fighting for the rights of women and gays. The Knoxville congregation has provided sanctuary for political refugees, fed the homeless and founded a chapter of the American Civil Liberties Union, according to its Web site.
Kemper said the gunman shouted before he opened fire.
"It was hateful words. He was saying hateful things," she said, but refused to elaborate.
The FBI was assisting in case the shooting turned out be a hate crime, Police Chief Sterling Owen said. Police were taking statements from witnesses and collecting video cameras from church members who taped the performance.
Authorities searched Adkisson's duplex in the Knoxville suburb of Powell on Sunday night. A bomb squad was called in as a precaution.
"In a situation like this we're not taking any chances," police Lt. Doug Stiles said. Police refused to provide any details about what they found.
The shooting started as about 200 people watched 25 children perform a show based on the musical "Annie."
Church member Mark Harmon said he was in the first row. "It had barely begun when there was an incredibly loud bang," he said.
Harmon said he thought the noise was part of the play, then he heard a second loud bang. As he dove for cover, he realized a woman behind him was bleeding. She looked like she was in shock, touching her wound, he said.
"It seems so unreal," Harmon said. "You're sitting in church, you're watching a children's performance of a play and suddenly you hear a bang."
Harmon said church members just behind him in the second and third rows were shot. His wife told him that she saw the gunman pull the shotgun out of a guitar case.
Witnesses reported hearing about three blasts from the 12-gauge shotgun. Witnesses said they did not recognize the gunman.
Church members said the gunman was tackled by John Bohstedt, who played "Daddy Warbucks" in the performance. He declined comment when reached by phone at his home.