Police have a warehouse in north-east Paris surrounded, where it is thought the two gunmen suspected of carrying out the fatal shootings in the city on Wednesday have taken a hostage.
There are reports Cherif and Said Kouachi have told negotiators they are prepared to die as martyrs.
MORE: Yemeni official: 1 brother in Paris attack suspected of fighting for al-Qaida in Yemen: http://t.co/0t7xYJv3WU— The Associated Press (@AP) January 9, 2015
12 noon update: Phone contact has been made with terror suspects holding a hostage north east of Paris, a French official has confirmed. It also emerged this morning that authorities now believe that there is a link between the brothers and the suspected perpetrator of the fatal shooting of a a police officer yesterday in Montrouge.
Residents in the town of Dammartin-en-Goele are being told to stay indoors and one local school has been evacuated.
Sky News reports that one of the Kouachi brothers turned up at the printing factory wearing black combat gear and a bulletproof vest and was initially mistaken for a police officer. He then told a worker: "Get out of here, we don't kill civilians."
Yves Albarello, UMP MP for Seine-et-Marne told French broadcaster i@tele that the two suspected hostage takers had declared that they wanted to "die as martyrs''.
A salesman named as Didier told the radio station France Info that he believed he had encountered and shaken the hand of one of the terrorists today in Dammartin-en-Goele.
He said when he arrived to meet a customer called Michel this morning he met a heavily armed man dressed in black and wearing a bullet proof vest. He took the man to be a police officer but became suspicious because of what he said to him.
Didier said: “I encountered a terrorist and shook his hand. When I arrived, my customer came out with an armed man who looked like a police officer. My customer told me to leave.
“(The armed man) said to me ’I am the police. Go, we do not kill civilians’. I decided to call the police. I guess that was one of the terrorists. After I left, Michel shut the gate behind me.
“I knew there was something wrong. I decided to call the police. It could have been a police officer if he had not said to me ’we do not kill civilians’. I have been very lucky this morning.”
He went on: “I did not formally recognise them. They were dressed like police. It could have been a police officer if he had not said to me ’We do not kill civilians’. They were heavily armed."
Authorities evacuated a nearby school at around midday local time after the suspects, brothers Cherif and Said Kouachi, agreed by phone to allow the children safe passage, town hall spokeswoman Audrey Taupenas told the Associated Press.
A French gendarme and municipal officer escort children from the Henri Dunand school onto a bus to be taken to a safe location to be picked up by their parents in Dammartin-en-Goele, 30 kilometers (19 miles) northeast of Paris.
It is now understood that the Kouachi brothers, who were well-known for holding jihadist views, were on a British watch and no-fly list to prevent them from entering the UK or passing through a British airport.
US intelligence placed the brothers on the list at the same time as Britain. Questions have been asked about how closely the pair were monitored by the French authorities.
The BBC quotes Cherif Kouachi’s lawyer telling the terror suspect to surrender.
Vincent Ollivier said: “I would have only one piece of advice to give Mr Kouachi – it would be to hand himself over to police authorities so that all light can be shed on this case.
Meanwhile French President Francois Hollande has revealed similar plots were recently foiled.
"We have known for several months that there have been a number of attempts at this sort of attack which fortunately could not be realised," he said.
"We have to do everything to make sure our citizens are protected."