Earlier, a news agency affiliated with the Islamic Group has posted photos purportedly showing the bodies of hostages lying in pools of blood. The authenticity of the pictures, carried by the Amaq news agency and monitored by the SITE Intelligence Group, could not be independently confirmed.

The same report says 24 people have been killed and 40 wounded, including foreigners. That figure could not be confirmed either. Police say two officers were killed and 26 people wounded in a gunbattle with the militants as the standoff continues into Saturday morning.

Seven Italian nationals are thought to be among the hostages, Italian state television said quoting the Italian ambassador to Bangladesh.

The top Japanese government spokesman said Saturday a Japanese citizen may also be among those held at gunpoint. Chief Cabinet Secretary Yoshihide Suga said in an early morning press conference that the government has set up a task force to gather information as well as a liaison office in the Prime Minister’s Office. A high-ranking Japanese government official said that more than one Japanese is likely to be caught up in the incident. Prime Minister Shinzo Abe instructed the government that saving life should be the top priority, Suga said, adding that the prime minister has cancelled a planned trip to Hokkaido where he was suppose to stump for candidates from his Liberal Democratic Party standing in the upcoming upper house election.

The Islamic State group claimed responsibility for the attack on the Holey Artisan Bakery restaurant in Dhaka’s upmarket Gulshan diplomatic quarter in which two police officers were killed.

Police said the gunmen burst in shouting “Allahu Akbar” (God is the Greatest) as people were having dinner at around 9.20 pm (1520 GMT) and set off explosives.

Police said the men appeared to be Islamist militants. A member of Bangladeshi security forces say authorities are planning to launch a coordinated response at dawn Saturday to end the hostage-taking by militants inside a Dhaka restaurant popular with foreigners.

According to internet service provider Aamr, authorities also ordered internet services to be blocked across the country.

A member of the Rapid Action Battalion, identifying himself as Lt. Col. Masood, told Indian TV that he attackers “have not responded to authorities’ calls for negotiation.”

At least 35 people, including about 20 foreigners, were still trapped inside the restaurant, according to kitchen staffer, Sumon Reza, who was among more than 10 people who managed to run to the rooftop and escape.

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.

State Department spokesman John Kirby says the US is in contact with the Bangladesh government and has offered its assistance to bring those responsible to justice.

He said all official American personnel are accounted for with no injuries reported, and the department is working with local authorities to determine if any US citizens and locally-employed staff were affected.

Some diners managed to escape, but police said there were still a number of people being held inside the restaurant hours after the assault.

Some managed to speak to relatives by phone, reporting there were up to 40 people trapped inside, around half of them foreigners, the private Ekattur TV station said.

Another told relatives he feared they would be killed if police tried to storm the restaurant to end the siege.

“He is very nervous,” the man’s nephew, who had spoken to him by phone, told AFP.

“He urged the police not to storm the restaurant, saying the gunmen will kill them.”

The White House said US President Barack Obama had been briefed on the attack, a rare occurrence in an area of Dhaka considered relatively safe.

“We are trying to communicate with them (gunmen). We want to resolve it peacefully,” the head of Bangladesh’s elite security force Benazir Ahmed told reporters.

The restaurant’s supervisor Sumon Reza who escaped by jumping from the roof told a local newspaper there were 20 foreigners being held hostage.

“I was in the roof. The whole building was shaking when they set off explosives,” he said.

Bangladesh has been reeling from a wave of murders of foreigners, religious minorities and secular activists by suspected Islamist militants.

But those murders generally only involved a handful of assailants and the latest attack appears to have been on a much bigger scale.

The IS-linked Aamaq news agency said the group was behind the attack and that “more than 20 people of different nationalities (were) killed”.

Heavily armed police and paramilitary guards cordoned off the area after the gunfight broke out.

“Two police officers including the head of Bani police station were killed. It appeared they were hit by bullets and splinters from a grenade,” deputy commissioner of Dhaka police Sheikh Nazmul Alam told AFP.

“Up to 20 police officers were injured. Seven-eight people have come out of the restaurant. But there are some people inside.”

The attack took place near the Nordic Club, where expatriates gather, and the Qatar embassy as Bangladesh observes the Muslim holy month of Ramadan.

The French Ambassador Sophie Aubert said the restaurant was “very popular” among diplomats and other foreigners in Dhaka.

“We’re very concerned that there are some hostages inside,” she told AFP.

It follows a series of killings targeting foreigners in Bangladesh that have been claimed by the Islamic State group.

Earlier Friday a Hindu temple worker was hacked to death in western Bangladesh.

Police also shot dead two Islamist students suspected in last month’s murder of an Hindu priest and arrested a top Islamist militant who masterminded an attack on a Hindu lecturer last month.

The government and police blame homegrown militants for the killings, which they say are part of a plot to destabilise the country.

They have blamed the main opposition Bangladesh Nationalist Party (BNP) and its Islamist ally.

Last month authorities launched a nationwide crackdown on local jihadist groups, arresting more than 11,000 people, under pressure to act on the spate of killings.

But many rights groups allege the arrests were arbitrary or were a way to silence political opponents of the government.

Experts say a government crackdown on opponents, including a ban on the country’s largest Islamist party following a protracted political crisis, has pushed many towards extremism.

Additional reporting by Reuters, Kyodo