The road closures have now been lifted and police have thanked local residents and businesses for their "support and patience" throughout the incident.
One eyewitness said they heard a series of loud bangs, which they believed to be gunshots, before seeing armed police arrive on the scene.
"Shortly before 3am today a 24-year-old man from Oxford was arrested on suspicion of attempted murder in connection with the incident".
Members of the public have been warned to avoid the area, and police have said people should present themselves to officers if they wish to return home to make sure it's safe.
Streets around the building were put on lockdown as officers negotiated with the gunman.
"I heard about five gunshots and there was an armed response. The entire area outside my flat is sealed off, and there is a police officer with a dog stationed a few metres from the balcony". "Again, I thought the second round were firecrackers", she told the Press Association.
Another witness told The Sun Online the street had been evacuated and families had become anxious about where to spend the night.
"One patient is now being assessed and treated for non-life threatening injuries".
The exchange of gunfire took place in Paradise Square and resulted in one individual sustaining a non-life threatening injury, the South Central Ambulance Service reported.
"Because the shooting was directly behind the hotel block in which my room is I did feel anxious that someone with a larger weapon could be a threat".
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