Customers at the Callendar Arms in Falkirk rushed into the street around 12.30 a.m. on Saturday, many of them having problems breathing and complaining of itchy eyes, after the "noxious substance" spread through the lounge area.
Emergency services from all over Central Scotland raced to the scene and police quickly cordoned off the area, before paramedics, helped by firefighters, gave first aid to those affected.
Two women, aged 23 and 25, were taken to Stirling Royal Infirmary for treatment for breathing difficulties and later released. Five others were treated in the street, the majority needing oxygen for respiratory problems.
Eyewitnesses spoke of firefighters in special gas protective clothing checking the pub before giving it the all clear.
Police investigations into the incident are still continuing but it is understood a "squaddie's prank" is not being ruled out.
Apparently members of the Armed Forces have previously been involved in similar incidents where CS-type pellets were used in public places.
Licensee Alan Heirs (52) was enjoying a night off in his Lionthorn home when he was alerted to the incident by bar manager Garry McDonald.
Mr Heirs immediately raced to his Callendar Road premises and was stunned by the sight that met him.
He said: "The police had it all taped off and there were dozens of emergency vehicles everywhere. It was a horrible moment but the main thing is no-one was seriously injured."
The pub boss told how around 180 people and five staff had been in the lounge at the time of the incident enjoying the usual Friday night karaoke entertainment. Some 15 minutes before last orders, one customer came out of the gents' toilets complaining that his eyes were "nipping and watering".
When the bar manager checked, he found the toilets filled with fumes which left him coughing and spluttering.
Mr Heirs said: "He immediately evacuated the building and called the emergency services. His quick actions have been praised as ensuring things weren't a lot worse.
"The fire service used big fans to clear the air and we were eventually allowed in at about 4.30 a.m. to start clearing up. We left around six and came back at 9 a.m. but then the police asked us leave again to allow their forensic investigations to continue."
Police left around lunchtime when checks were then carried out by Falkirk Council's environmental health staff. The all-clear was given at 3 p.m. and the pub opened for business half an hour later.
Mr Heirs added: "I haven't a clue why it happened. But I'm just relieved that those injured weren't serious.
''I want to apologise to anyone who was in the pub at the time, particularly those affected and would appeal for anyone who has any information to come forward to speak to the police."
A spokesman for Central Scotland Fire and Rescue Service confirmed they sent four appliances – from Larbert, Falkirk, Bo'ness and the Alloa support unit – after being alerted to a gas escape.
A technical support unit from Strathclyde was also called in when it was discovered there could be chemicals involved.
The Scottish Ambulance Service sent three ambulances, two rapid response units and had its special operations team called out to the incident.
Last night (Wednesday), Detective Inspector Wilson Gill, head of Falkirk CID, said: "We are following a number of lines of inquiry.
''These are positive and our investigations are continuing at this stage. Samples from the pub are currently away for forensic analysis."
Anyone with information is asked to contact Central Scot-land Police on (01324) 634212.

j.buchanan@falkirkherald.co.uk