The government has issued a red alert in Dhaka after Bangladesh security forces ended a siege at a cafe in Dhaka where dozens of diners were being held captive.
Army has also been deployed around the city. In an attack claimed by the Islamic State militant group, the gunmen reportedly took up to 40 hostages and killed several police officials in a cafe in Dhaka.
Bangladeshi Rapid Action Battalion (RAB) have started an operation to free the hostages.
The official said naval commandos were called in to join the special operation conducted by the Rapid Action Battalion and Borders Guard Bangladesh.
Bangladesh army soldiers have also been mobilised, according to him.
After hours of quiet, a fresh round of heavy gunfire took place on Saturday morning, an eye witnesses told CNN.
Fayad Munaim, who could hear intense gunfire coming from the direction of Holey Artisan Bakery, said the shots lasted about 10 minutes. Then the barrage stopped.
As the police exchanged fire with the gunmen, the attackers threw explosives, a source at the scene said.
At least seven Italian nationals and an unknown number of Japanese are thought to be among the hostages in the Holey Artisan Bakery restaurant, which is popular with foreigners.
Meanwhile, the IS group claimed that its gunmen killed 24 people and injured 40 others in the attack late Friday.