It is believed one man in his late 20s has been hospitalised as a result of the attack which happened on the footpath outside Gallagher’s Hotel just after 7.30pm.
It is understood the man was rushed to Letterkenny General Hospital but has since been transferred to Dublin for further treatment.
Gardai have been at the scene of the attack and have sealed off the area between Gallagher’s Hotel and the neighbouring McCarry’s Bar.
Passers-by told Donegaldaily.com that there was still evidence of blood on the ground.
It is not known if there have been any arrests at this stage.
Gardai have also been taking statements from people in the vicinity of the assault.
The victim of the knife attack is believed to be a local Letterkenny man.
His injuries are said to be “very serious.”