Gunmen have stormed Friday night, a popular cafe in the diplomatic area of the Bangladeshi capital, Dhaka, taking a number of hostages.
Several foreigners are among those being held by eight or nine armed men in the city's Gulshan district.
A police officer has been killed and at least five others injured in a gun battle, a spokesman said.
Islamic State has said it carried out the attack.
A statement on the group's self-styled news agency Amaq said militants had attacked a restaurant "frequented by foreigners".
Police and security forces have sealed off the area and are trying to negotiate the hostages' release.