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At least 20 hostages have been killed following a 10-hour stand-off at a cafe in Bangladesh, officials have said.

Seven Japanese citizens remain unaccounted after fierce gunfighting broke out as police stormed the restaurant in the capital Dhaka where ISIS terrorists were holding a number of people captive.

At least eight gunmen 'shouting "Allahu Akbar"' stormed the cafe, close to the British High Commission, taking a number of people hostage . Six have been reported as being shot dead.

ISIS has claimed responsibility for the attack and said 24 people of different nationalities were killed.

"Most of them had been brutally hacked to death with sharp weapons," said army spokesman Brigadier General Nayeem Ashfaq Chowdhury.

(Image: AR Sumon/ZUMA Wire/REX/Shutterstock)

Police said two officers were killed and at least 20 people and 40 wounded at the Holey Artisan restaurant in the upscale Gulshan area of Dhaka.

The number of gunmen and hostages still in the restaurant was not clear, Mizanur Rahman Bhuiyan, a deputy director at the Rapid Action Battalion force, said.

(Image: Getty Images) (Image: Getty)

Police stormed the cafe after Islamic State posted photos it claims are of foreigners killed in the attack.

The rescued included two Sir Lankans and a Japanese citizen who was wounded.

The British Foreign Office says its urgently seeking more information from Bangladeshi authorities, as diplomatic staff at the British High Commission - just streets away from the restaurant - remain unaccounted for.

(Image: Barcroft Media) (Image: Barcroft Media)

“Islamic State commandos attack a restaurant frequented by foreigners in the city of Dhaka in Bangladesh,” Amaq, the terror group’s news agency reported.

Employee Sumon Reza, who managed to escape the restaurant, reportedly said that about eight assailants armed with pistols, swords and bombs stormed the kitchen and took the chef hostage at about 9.20pm (4.20pm BST).

(Image: Google Street View) (Image: Google Street View)

Sumon said that the gunmen shouted "Allahu Akbar" (God is Greatest) before blasting several bombs, according to local press.

He also said that an Argentinian and an Italian are among those held hostage inside the restaurant.

The bakery is located in the diplomatic quarter of Dhaka, hosting most of the high commissions and embassies, as well as hotels, shops and other restaurants.

The restaurant, which serves traditional European baked goods such as croissants and waffles, is said to be popular with foreigners, including diplomats and expats.

Earlier, a resident near the scene of the attack said he could hear sporadic gunfire nearly three hours after the attack began.

(Image: Getty) (Image: Barcroft Media) (Image: Barcroft Media)

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"It is chaos out there. The streets are blocked. There are dozens of police commandos," said Tarique Mir.

Television footage showed a number of police being led away from the site with blood on their faces and clothes.

Heavily armed officers could be seen milling outside.

Meanwhile Brits in the area have been warned by the Foreign Office to "remain vigilant" and to "follow the advice of the local security authorities".

A spokeswoman for the Foreign Office told Mirror.co.uk: “We are urgently seeking more information from the Bangladeshi authorities following a shooting in Dhaka and are monitoring the situation closely.”

The leading officer, Salauddin Khan, who was injured during an earlier shootout, has died, a top Dhaka Metropolitan Police (DMP) official told The Daily Star .

The U.S. Embassy in Dhaka said on its Twitter feed there were "reports of shooting and hostage situation".

(Image: ATN News) (Image: ATN News)

The U.S. State Department said it was too early to say who was involved or what the motivation might be, but it confirmed that all Americans working at the U.S. mission there had been accounted

for.

State Department spokesman John Kirby told a press briefing: "We have accounted for all Americans working for the chief of mission authority."

He said the situation was "very fluid, very live."

Kirby was however unable to confirm whether private U.S. citizens were caught up in a "hostage situation."

The White House said President Barack Obama has been briefed on the ongoing situation.

Bangladesh has seen an increase in militant Islamist violence over the last year.

Deadly attacks have been mounted against atheists and members of religious minorities in the mostly Muslim country of 160 million people, with attackers often using machetes.

(Image: ATN News) (Image: ATN News)

Militants killed two foreigners last year, leading several Western firms involved in the country's $25 billion garment sector to temporarily halt visits to Dhaka.

Both Islamic State and al Qaeda have claimed responsibility for militant attacks in the country.

But the government denies foreign militant organizations are involved and blames two local groups, Ansar-al-Islam and Jamaat-ul-Mujahideen.