Police and paramedics were called to a small block of flats in Quigg Street, Lakemba, about 6.45pm after reports of a shot being fired.

A 66-year-old man was taken to hospital after being shot in the neck in an apparent dispute with his neighbour.

Crime scene officers scoured the pavement and driveway leading to the apartments late in the evening.

Police said the victim was recovering in Royal Prince Alfred Hospital on Friday morning with injuries that were not considered life-threatening.

The 85-year-old man was taken to the same hospital with a suspected fractured skull. He was in a serious condition on Friday morning, and remained under police guard.

"At this early stage of the investigation it is believed the older man shot the younger man during a meeting in the common area of the building," police said in a statement.

"It is further believed the older man was injured when falling down stairs during the incident."

One resident, who lives opposite, said she saw a very large man holding a bandage to his neck being taken away on a stretcher to a waiting ambulance.

But she was amazed when officers arrested the street's well-known octogenarian.

"He's a skinny, little man," the woman, who did not want to be named, said.

"He's a really short man."

She said she often said hello to him.

"He's a really nice man. He's quiet. All the neighbours know him."

But another resident said the man had once shaken a broom stick at her family after wrongly accusing them of dumping their rubbish with the apartment block's waste.

She said they told him the rubbish could not have been theirs because it contained Lebanese food and her family was not Lebanese.

Police said earlier the man was assisting them with their inquiries.

Crime scene tape surrounded the entrance to the block of flats as forensic officers worked into the night.

- with Megan Levy