At least five persons were killed and 18 persons rescued as Bangladeshi forces on Saturday started an operation to free up to 40 hostages taken by about eight to nine gunmen who attacked a restaurant in the diplomatic quarter of Dhaka.
In an attack claimed by the Islamic State militant group, the gunmen late on Friday reportedly took up to 40 hostages and killed several police officials in a cafe in Dhaka, Xinhua news agency reported.
Bangladeshi Rapid Action Battalion (RAB) have started an operation to free the hostages, the report said.
"Efforts to negotiate a peaceful end to the crisis are still ongoing though we've started a raid," a police official said.
The official said naval commandos were called in to join the special operation conducted by the Rapid Action Battalion and Borders Guard Bangladesh.
Bangladesh army soldiers have also been mobilised, according to him.
After hours of quiet, a fresh round of heavy gunfire took place on Saturday morning, an eye witnesses told CNN.
Fayad Munaim, who could hear intense gunfire coming from the direction of Holey Artisan Bakery, said the shots lasted about 10 minutes. Then the barrage stopped.
As the police exchanged fire with the gunmen, the attackers threw explosives, a source at the scene said.
At least seven Italian nationals and an unknown number of Japanese are thought to be among the hostages in the Holey Artisan Bakery restaurant, which is popular with foreigners.
Meanwhile, the IS group claimed that its gunmen killed 24 people and injured 40 others in the attack late Friday.