Bangladeshi forces this morning stormed an upscale Dhaka restaurant where heavily-armed terrorists held dozens of people hostage, killing at least six of the attackers and rescuing 13 captives including foreigners at the end of a 10-hour standoff. Seven Japanese are unaccounted for.
Reports said there were explosions and at least five bodies were found lying in pools of blood. Japan's government said that 12 people were rescued.
About 35 people were taken hostage, including about 20 foreigners, when gunmen stormed the Holey Artisan Bakery in Dhaka's Gulshan area, a diplomatic zone, on Friday night.
"We have gunned down at least six terrorists and the main building is cleared but the operation is still going on," Lt Col Tuhin Mohammad Masud, commander of the Rapid Action Battalion, told The Associated Press three hours after the commandos launched the rescue operation.
He said there were casualties among other hostages, but did not provide details.
Masud said that two Sri Lankans also were rescued.
Prime Minister Sheikh Hasina condemned the attack and said security officials arrested one of the terrorists.
"Because of the effort of the joint force, the terrorists could not flee," Hasina said in a nationally televised speech.
She also slammed television channels for hampering rescue operations and called for restraint while reporting these kinds of situation.
Condemning the attack, she said, "What kind of humans kill during the Holy month of Ramzan." She vowed to fight terrorist attacks in the country and urged people to come forward against terrorists.
The Islamic State group claimed responsibility for the attack, according to the SITE Intelligence Group, which monitors jihadist activity online. A news agency affiliated with ISIS claimed that 24 people had been killed and 40 wounded, including foreigners, according to SITE. The figures could not be independently confirmed.
The Amaq news agency also posted photos purportedly showing the bodies of hostages. The authenticity of the pictures could not be confirmed.
With the sound of gunfire and explosions, local TV stations reported that the rescue operation began at 7:40 a.m. It included army personnel with automatic weapons and at least seven armoured vehicles and ambulances.
Local media reported that an Argentine and two Bangladeshis also were rescued from the restaurant early Saturday, but details about their condition were not immediately available.
Commandos storming the restaurant discovered five bodies lying in blood, a police official who was not identified told Channel 24 TV station. It wasn't clear if they were terrorists or hostages.
The attack marks an escalation in the growing militant violence to hit the traditionally moderate Muslim-majority nation in the past three years, but with increasing frequency in recent months. Most attacks have been by machete-wielding men singling out individual activists, foreigners and religious minorities.
Bangladesh did not immediately respond to the claim of responsibility by ISIS, but in the past has denied that the extremist group has a presence in the country. The US State Department said it had seen the ISIS claim, but could not confirm its authenticity.
The attackers "have not responded to authorities' calls for negotiation," said Masud.
He said that the security cordon would prevent any of the attackers from escaping. Authorities also ordered internet services to be blocked across the country, according to internet service provider Aamra.
Police said the two officers died at a hospital after being wounded in the initial gunfire with as many as nine attackers, who also hurled bombs. Ten of 26 people wounded when the terrorists opened fire were listed in critical condition, and six were on life support, according to hospital staff. The injuries ranged from broken bones to gunshot wounds. Only one civilian was among the wounded.
Kitchen staffer Sumon Reza, who escaped, said the attackers chanted "Allahu Akbar" (God is Great) as they launched the attack around 9:20 p.m. Friday, initially opening fire with blanks.
The nationalities of the hostages were not immediately clear. On Saturday, Japan's top government spokesman Yoshihide Suga said at a hastily called news conference in Tokyo that the government is trying to confirm that Japanese were among the hostages. Prime Minister Shinzo Abe told reporters that saving lives is the top priority.
Among the hostages was a businessman and his wife and two children, according to his uncle Anwarul Karim.
"My nephew Hasnat Karim called me and said he was inside with his family. He told me, 'Please save us, please!' And he hung up," he said. "We do not know what is going on there."
In Washington, a White House official said President Barack Obama was briefed on the attack by his chief counterterrorism adviser Lisa Monaco. The president asked to be kept informed as the situation develops, said the official, who was not authorised to speak publicly about the president's meetings.
The spree of recent attacks in Bangladesh have raised fears that religious extremists are gaining a foothold in the country, despite its traditions of secularism and tolerance.
About two dozen atheist writers, publishers, members of religious minorities, social activists and foreign aid workers have been slain since 2013.
On Friday, a Hindu temple worker was hacked to death by at least three assailants in southwest Bangladesh. Islamic State and Al Qaeda affiliates have claimed responsibility for many of the attacks.
Prime Minister Sheikh Hasina's government has cracked down on domestic radical Islamists. It has accused local terrorists and opposition political parties - especially the main opposition Bangladesh Nationalist Party and its Islamist ally Jamaat-e-Islami of orchestrating the violence in order to destabilise the nation, which both parties deny.