A decapitated head has been found attached to the gate at the entrance to a gas factory after it came under attack in south-eastern France, security officials said.
The torso was found near the site of an explosion at the scene near Grenoble but the victim was not decapitated by the blast, officials said.
Two flags, one white and one black and both with Arabic inscriptions, were found at the scene.
Several people were wounded in the incident. French officials said it began mid-morning in the Isere region when two men crashed a car into the entrance of the factory and into gas canisters, touching off the explosion.
One attacker, who is said to be known to authorities, has been arrested.
Police are searching for anyone else involved in the attack, and interior minister Bernard Cazeneuve has arrived at the scene.
France’s anti-terror prosecutor said the attack was carried out by “a terrorist group”.
The industrial site in Saint-Quentin-Fallavier, south-east of Lyon, belongs to Air Products, a US chemical company based in Pennsylvania.
President Francois Hollande described it as a terrorist attack and said one suspect had been arrested and a second might have been involved.
Francois Hollande confirms that one person has been killed and two people injured in today's attack https://t.co/1CJtYgEWzJ— Sky News (@SkyNews) June 26, 2015
He is returning to France and called a high level defence council meeting.
France went on high alert in January after extremist brothers Said and Cherif Kouachi killed 12 people – including two police officers – in attacks on satirical magazine Charlie Hebdo in Paris.