Larry Kamer told The Associated Press that his wife, Devereaux Smith, was at the morning staff party and told him by phone that the gunman had entered the room quietly, letting some people leave while taking others hostage.
Smith, a fundraiser for the nonprofit Pathway Home, was still inside the facility's dining hall and was not allowed to leave, he said. The Pathway Home, a privately run program on the veteran home's grounds, treats veterans of the Iraq and Afghanistan wars with post-traumatic stress disorder.
The three hostages were Pathway House employees, said California Highway Patrol Assistant Chief Chris Childs said. The gunman, who had a rifle, was confined to one room and authorities were trying to reach him on his cellphone and landlines in the facility as hostage negotiators stood by, he said.
Police evacuated the property and closed off nearby roads. An armored police vehicle, ambulances and several fire trucks were at the facility, which is home to about 1,000 residents.
Army veteran and resident Bob Sloan, 73, was working at home's TV station when a co-worker came in and said he had just heard four gunshots coming from the Pathway House. Sloan sent alerts for residents to stay put.
"People are starting to get concerned because it's been going on for so long," he said.
Except for helicopters buzzing overhead, the home was eerily quiet, Sloan said, adding that he could see police with "long-barrel assault-type weapons" crouching around the building, some taking cover behind trees.
Jan Thornton of Vallejo, California, was among hundreds of relatives worried how their loved ones were coping with the lockdown. Thornton said her 96-year-old father -- a WWII fighter pilot -- was inside a hospital wing and she had reached one of his friends who said he was safe.
Still, she worried about the stress of the lockdown on her father, considering his age and that he has post-traumatic stress disorder and some dementia. Thornton said her "heart just bleeds for the people that are being held hostage."
A group of about 80 students who were on the grounds were safely evacuated after being put on lockdown, the sheriff said. The teens from Justin-Siena High School were at a theater rehearsing a play.
"They were a distance away from the shooting situation," Robertson said.
The state Veterans Affairs department says the home that opened in 1984 is the nation's largest veterans home, with about 1,000 elderly and disabled residents. Its website says it offers residential accommodations with recreational, social, and therapeutic activities for independent living.
Yountville is a small town home to wineries such as Domaine Chandon, which is less than a half-mile from the veterans home, and Thomas Keller's famed restaurant The French Laundry, which is about a mile away. Messages left at both establishments were not immediately returned.
The Associated Press contributed to this report.