The attack on a cafe in the Bangladeshi capital Dhaka has left 26 people dead including six armed attackers, the Bangladesh army has said.
Army Brigadier General Naim Asraf Chowdhury told a news conference 13 people were rescued including one Japanese and two Sri Lankans.
Originally it was reported that all those shot dead were foreigners but a Bangladeshi army spokesman said locals were also killed.
The army concluded an operation to clear the cafe after a 12-hour siege that began when gunmen stormed the restaurant, which was popular with foreigners, last night.
Earlier, Bangladesh Prime Minister Sheikh Hasina said one gunman had been captured alive in a dawn raid on the cafe by Bangladeshi commandos.
"It was an extremely heinous act. What kind of Muslims are these people? They don't have any religion," she said in a televised speech.
"People must resist these terrorists. My government is determined to root out terrorism and militancy from Bangladesh."
Gunmen attacked the upscale cafe in the diplomatic area of Dhaka late yesterday and had been holding about 20 hostages, before police poured into the building to try to free those stuck inside.
At least two police officers were killed.
Lieutenant Colonel Masood of the Rapid Action Battalion told India's Times Now TV channel that he believed between six and ten gunmen had stormed the restaurant.
Just metres from the scene, relatives and friends waited to hear about their loved ones.
"Last night when I heard about the incident I instantly called my brother-in-law who was working in the restaurant and I was able to talk with him until nine o'clock last night.
"There was nothing after that. His phone is switched off. We don't know what happened to him," one man said.
The so-called Islamic State group claimed responsibility for the attack, according to the SITE Intelligence Group.
The hostage crisis began when security guards in the Gulshan district, popular with foreigners, noticed several gunmen outside a medical centre.
When the guards approached, the gunmen ran into a building housing the restaurant, packed with people waiting for tables.
Ali Arsalan, co-owner of the restaurant, said that his staff told him the attackers yelled "Allahu Akbar" (God is Great) as they stormed the building that is split between a bakery and the O'Kitchen Restaurant.
Police said the assailants exchanged sporadic gunfire with police outside for several hours after the gunmen attacked the restaurant around 9pm local time yesterday.
A police officer at the scene said that when security forces tried to enter the premises at the beginning of the siege they were met with a hail of bullets and grenades that killed at least two of them.
Television footage showed a number of police being led away from the site with blood on their faces and clothes.
A cafe employee who escaped told local television about 20 customers were in the restaurant at the time, most of them foreigners. Some 15 to 20 staff were also working at the restaurant, the employee said.
The hostage crisis marks an escalation from a recent spate of murders claimed by so-called Islamic State and al Qaeda.
The restaurant assault also comes after Bangladesh hanged an Islamist party leader, Motiur Rahman Nizami, on 11 May for genocide and other crimes committed during a 1971 war of independence from Pakistan.
That has drawn an angry reaction and some scattered violence from supporters.
The Department of Foreign Affairs has said it has received no requests for consular assistance following the attack in Dhaka.
Irish citizens travelling to Bangladesh are advised to exercise a high degree of caution because of heightened security concerns.
