The police said that they partly witnessed the shoot-out which happened around 11 pm.
"We managed to cordon off the area very quickly and could arrest these people who were at the scene at the time," said Hans Nilsson, officer in command with the police Region South.
"It’s a pure miracle that no one was hurt," he added.
With 40 years experience from police work, he said that he has never seen arrests on such a grand scale.
"This is pretty unique. Often we enter the picture a little later," he told Swedish Radio's local channel in Malmö.
Many of those arrested are said to have a criminal record. They are of different ages, but a majority of them are born in the 1980s and 90s.
The suspects were being questioned on Tuesday morning, while apartments and cars have been searched and technical evidence has been gathered from the scene.
Police say they will not speculate on the motive for the shooting, or if there are any links to events on Sunday evening, when shots were fired at a house on Ramels väg in Malmö. According to the daily Sydsvenska Dagbladet, one of the residents in that house has been revealed as a possible police source in a case that appeared in court on Monday, concerning bombs against the housing company Victoria Park at the end of last year.
No-one was injured in the shooting on Monday evening, which also took place at Ramels väg. Prosecutors have 12 hours after the arrests to decide whether they have enouth to charge the suspects or not.