Police have taken two men in for questioning. Police underlined however that the perpetrators remain at large.
"We consider that these people can give us valuable information. But they have neither been arrested nor are they suspected of any offence," Kjell Lindgren at Stockholm police told news agency TT.
The deceased man is a 27-year-old Lithuanian citizen. The injured man's identity and nationality have not yet been confirmed. According to the press office at Karolinska hospital the man's condition is described as serious but stable.
The shooting took place on Swedenborgsgatan on Södermalm in central Stockholm shortly after 7am on Wednesday.
"I was awoken at 7.15am by two shots and then a man screamed. I went out on to my balcony, looked out and saw a man lying on the ground and a number of witnesses milling around. Then the ambulance arrived and number of police," a witness told TT.
"At first I thought that it was New Year's Eve. But there is quite an intense feeling to this area so I wasn't that surprised really. But all the same it feels awful."
According to Kjell Lindgren a large number of police are working on the case.
A TT news reporter at the scene this morning looked on when a group of police officers stormed an apartment near the crime scene on the tree-lined residential street.
"We have entered an apartment that we consider to be interesting," police confirmed.
The police cordoned off parts of Södermalm and suspended transport services on Wednesday morning but by 8am trains were running as normal. The area in the vicinity of the shooting has been sealed off and a police forensics team is examining the scene.
A moped is reported to have been found burning near Årstaberg train station a couple of kilometres from the murder scene soon after the shooting.
"We are taking a broad approach to the investigation at the moment and can not rule out that there may be a connection," said Kjell Lindgren.
Police report that they are looking for two men in connection with the shooting.
Five or six police broke into the apartment on Swedenborgsgatan on Södermalm in central Stockholm at around 9.20pm, according to news agency TT.