A mother and her two-year-old daughter have died following the car attack in Munich, police say.
The woman, 37, and her child are the first fatalities reported by German authorities.
Police spokesman Ludwig Waldinger said to the AFP news agency: "Unfortunately, we have to confirm the deaths today of the two-year-old child and her 37-year-old mother."
More than 30 other people were injured after a Mini Cooper was driven into a crowd of activists in Munich on Thursday, with an man arrested at the scene.
The driver is believed to have accelerated into demonstrators linked with the Verdi trade union on Seidlstrasse at around 10:30am.
Bavaria’s Prime Minister Markus Söder said: "It is suspected that this was an attack."
Officers confirmed they opened fire on the vehicle after it hit people - in an effort to get it to stop.
The suspect lived in Munich since he arrived aged 16 as an unaccompanied minor.
He lived legally in Germany, with a work permit.
The suspect had no previous convictions.
He is being investigated for 36 counts of attempted murder.
The suspect is also being investigated for bodily harm, and dangerous interference with road traffic.
There is no evidence that he was connected to any radical or extremist network.
On social media, one witness, a German journalist, reported the incident occurred at a rally when a car ploughed into a demonstration.
’People were sitting on the ground, crying and shaking,’ the reporter added.
Munich’s mayor Dieter Reiter (SPD) told BILD : "The police chief has just informed me that a vehicle drove into a group of people and unfortunately many people were injured, including children. I am deeply shocked. My thoughts are with the injured."
With federal elections only eight days away, the attack has ignited a torrent of renewed calls by political candidates for immigration reform.
German Chancellor Olaf Scholz visited the site of the attack while many have been laying flowers at the site to mourn those affected.
He told Germans to "stand together" in the face of the attack.
He said: "We all have to stand together now, make sure that our country sticks together and that the very values that united those who peacefully organised a rally here and held a march are united with those who helped here, namely that we are together as human beings."
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