A TOWN in South America is living in fear after several sightings of a 'creepy gnome' that locals claim stalks the streets at night.

The midget - which wears a pointy hat and has a distinctive sideways walk - was caught on video last week by a terrified group of youngsters.

Teenager Jose Alvarez - who filmed the gnome - yesterday told national newspaper El Tribuno that they caught the creature while larking about in their hometown of General Guemes, in the province of Salta, Argentina.

He said: “We were chatting about our last fishing trip. It was one in the morning.

“I began to film a bit with my mobile phone while the others were chatting and joking.

"Suddenly we heard something - a weird noise as if someone was throwing stones.

"We looked to one side and saw that the grass was moving. To begin with we thought it was a dog but when we saw this gnome-like figure begin to emerge we were really afraid."

Jose added that other locals had come forward to say they had spotted the gnome.

He said: “This is no joke. We are still afraid to go out - just like everyone else in the neighbourhood now.

"One of my friends was so scared after seeing that thing that we had to take him to the hospital.”