Emergency services were called to Cambrian Road in Newport, south Wales, at 5.30am on Sunday to reports of an incident involving a vehicle and pedestrians.
The vehicle, believed to be a blue Ford C-Max, collided with four people - three women and a man.
A spokeswoman for Gwent Police said all four were taken to hospital, with two of the women believed to have suffered life-changing injuries.
“Following the incident this morning on Cambrian Road in Newport involving a car and four pedestrians, an 18-year-old man from the Newport area has been arrested on suspicion of causing injury by dangerous driving,” she said.
“Investigations are ongoing and we’d like to thank everyone for their comments and shares.”
Footage circulated on social media appears to show people screaming as a car drives into crowds of revellers.
In the clip, the car reverses and drives forward twice as people attempt to stop it by hitting the windscreen and driver’s window.
The driver is said to have made off in the direction of Maindee after the incident, with the car later found burnt out on Magor Street.
Cambrian Road is closed while investigations continue.
Superintendent Glyn Fernquest said: “This is a shocking incident for everyone involved.
“Specialist officers are currently investigating and are appealing for information in relation to identifying the driver of this vehicle.
“I’d like to just reassure the public that this incident is not believed to be terror-related and has no links to the Newport marathon that is taking place this morning.
“Anyone who is taking part in the marathon should carry on with their arrangements as planned.”
Anyone with information should call 101 quoting log 110 29/4/18.