Emergency services were quickly on scene in Hollinswood after 999 calls at about 5.40pm yesterday.
Police arrived to find a 44-year-old man at Dallamoor suffering from potentially serious stab wounds. He was later taken to Royal Shrewsbury Hospital.
Video from the scene:
A second 44-year-old man has been arrested on suspicion of causing GBH and remains in police custody.
A land ambulance and the Midlands Air Ambulance from Cosford arrived as police officers worked to secure the area.
A cordon was put up and remained in place overnight and throughout Friday morning.
Detectives were also at the scene on Friday and numerous police cars were in attendance over the course of the day.
Nearby residents said the incident was "disturbing".
Doddington resident and retired nanny Sheena Ireland, 65, said: "It was very disturbing for all of us in the area last night.
"At about 6pm I saw the flashing blue lights going by and then my daughter came in at about 6.15pm as the news was going on the TV and she said there were emergency vehicles by the shops.
"I thought maybe the police had come to carry out a raid at first, but then I phoned my friend who also lives nearby and we both could hear the sound of a helicopter and she could see that it was the air ambulance arriving.
"Apparently, from what people are saying, there was some fuss going on during the afternoon.
"Thank God they have arrested somebody.
"I hope this is a one-off. Hollinswood is a nice area."
Detective Sergeant Andy Dawson, from Malinsgate Police Station, said they believe it to be an "isolated incident" and that "there is no immediate threat to people in the area".
An ambulance spokesman said: "We were called by police at 5.48pm on Thursday to a stabbing at Dallamoor in the Hollinswood area of Telford.
"We sent the Midlands Air Ambulance from Cosford, a land ambulance and paramedic officer to the scene.
"On arrival, crews found one patient, a man, with potentially serious injuries.
"He was treated at the scene before being conveyed by land ambulance on blue lights and sirens to hospital for further treatment.”
West Mercia Police is appealing for information.
Anyone with information can contact the Telford policing team on 01952214612, quoting incident reference number 538i of March 18.
Alternatively, contact Crimestoppers anonymously on 0800555111 or crimestoppers-uk.org