He pulled a gun on the passengers on the bus to the coastal city of Travemunde but did not shoot anyone, a witness told Lubeck News.
The driver is reported to have slammed on the brakes and opened the doors so people could escape before he was attacked himself.
Sources told Lubeck News the suspect was an Iranian man in his mid-30s who is now in police custody.
Police confirmed several people were wounded in the onslaught but no deaths have been reported as yet.
Witness Lothar, 87, said: “The passengers jumped out of the bus screaming, it was terrible, and then the injured were taken away.”
Police cordoned off the area as they continued their investigation into the attack.