The suspect, a 44-year-old named Cui Lidong, wounded his wife and daughter at home before ploughing a car into pedestrians, said the Zaoyang City government in Hubei province in an online statement.
The case is under investigation and the injured are being treated, it added.
A video, published by Shanghai-based news outlet The Paper, shows a body covered in a blanket left on the roadside and a group trying to lift someone onto a stretcher.
China has suffered a spate of similar incidents in recent months.
Last September, 11 people died and dozens were injured when a car struck a crowd in a public square in the central Hunan province city of Hengdong.
Police detained the driver, a man in his 40s, and described him as a "vengeful repeat offender" who had daggers in his car and intended to "cause serious damage".
In late November, a car ploughed into a group of children crossing a street in front of an elementary school in the northeastern Liaoning province, killing five people and injuring at least 19.
The driver said he "chose his victims at random" and had reportedly been contemplating suicide due to domestic troubles before the tragedy occurred.
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