The Caribbean Carnival is a street festival, complete with dance, music and costumes. A large number of both unarmed and armed officers attended and found a number of people injured as a result of a firearm being discharged.
Detective Superintendent Debbie Dooley said police were trying to establish "exactly where this incident took place and who is responsible for such a risky attack".
Police said more officers would be patrolling the area over the next few days in a bid to reassure residents.
It happened after the popular Caribbean Carnival of Manchester took place on Saturday.
"If you have any concerns please approach them and they will try and help in any way they can".
"At this stage, ten people are now in hospital suffering from minor to major injuries".
He said he believed the carnival would go ahead as planned on Sunday.
Greater Manchester Police said one man was in a serious but stable condition with leg injuries and nine others, including the two children, were taken to hospital with pellet-type wounds after the incident on Claremont Road in Moss Side at 2.30am on Sunday.
Footage, reportedly shot during the aftermath of the shooting was posted to Twitter.
Investigations are underway to identify exactly where the shooting occurred and who was involved.
Anyone with any information should call police on 0161 856 4166 quoting incident number 297 of 12 August or the independent charity Crimestoppers anonymously on 0800 555 111.