At this time, police do not now believe the situation is terror-related.
The Paris prosecutor's office detained the suspect, a 26-year-old man born in Morocco, a judicial official said.
The man is being investigated on multiple counts, including kidnapping and sequestration, attempted homicide and violence with a weapon, the official said.
Authorities said that officers from a specialist unit were responding to an "unstable person" who was holding two people but that there was no indication the incident was terrorism-related.
Police officers of the BRI intervention squad prepare a shield on June 12, 2018 near the site of an ongoing hostage taking in central Paris.
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A street in the French captial has been closed off as police cordon the area. Their captor apparently was armed with knives.
There were no immediate details on the age, appearance or nationality of the hostage taker.
Three people, including a pregnant woman, were taken hostage however one managed to escape.
"The man claims to be in possession of a bomb and a handgun", France Bleu said, adding that the hostage-taker demanded to speak with Iranian embassy.
The Evening Standard reports the attack doused the remaining two hostages in petrol.
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