A manhunt was underway in Pendleton early Friday after two officers were injured in a police standoff with a gunman late Thursday, officials said.Just after 11 p.m., police were dispatched to a home in the 400 block of Water Street on reports of a disturbance.Pendleton resident Angela Reynolds told RTV6's Tanya Spencer that a man came into her garage near her house in the 300 block of East Water Street. Shortly after, she heard "rapid" gun fire."We squatted down beside the garage and then we heard something. We didn't realize at the time that (the suspect) was in the garage. We scrambled into the house and I then I called 911. The cops pulled up and we told them (the suspect) was probably in the garage because we heard something. Then the next thing we know, there's gunfire going back and forth, Reynolds said.Todd Harmeson, spokesman for Madison County Emergency Management and Homeland Security, said police were involved in routine law enforcement call at the intersection of East and Water streets near State Road 67 when they heard multiple shots were fired.When police responded to the scene near 300 East Water Street, gunfire was exchanged between officers and the suspected gunman, officials said.Harmeson confirmed that an Anderson police officer was shot and injured, and a Pendleton police officer was grazed by a bullet. Both officers were hospitalized with non-life-threatening injuries, officials said.Police said the suspected gunman, Jim Kenneth Bailey, 59, of New Castle, is believed to be heavily armed.Police described Bailey as a white, 5 feet 11 inches tall and 200 pounds. He was last seen wearing black shorts and a gray T-shirt.Harmeson said multiple SWAT teams were actively searching for the suspect. Police did not release any details on a possible motive.An Indiana State Police helicopter is also involved in the search. ISP asked anyone with information on Bailey's whereabouts to call 765-642-0221.At 5:45 a.m. on Friday, ISP officials issued a statement saying that they've "sealed off" the town of Pendleton and asked drivers to find alternate routes. Watch RTV6 and refresh this page for updates.