A gunman is believed to have killed at least two people during a hostage-taking at a supermarket in Trèbes, southern France.
An operation involving elite police is continuing at the Super U shop, where others were wounded.
Reports say the gunman, who remains in the supermarket, pledged allegiance to the Islamic State group.
Earlier, a policeman was shot and wounded while jogging with colleagues in Carcassonne, a 15-minute drive away.
He was shot in the shoulder by the same suspect involved in the supermarket hostage-taking but is not critically injured, Yves Lefebvre, secretary-general of the SGP Police-FO union told the Associated Press.
Trèbes Mayor Eric Menassi told BFM TV that the gunman was now alone in the shop with one police officer, after other hostages were freed.
The suspect is said to be heavily armed and asking for the release of Salah Abdeslam, the most important surviving suspect in the 13 November 2015 Paris attacks, which killed 130 people.
Reports say the suspect is known to French intelligence services and that his mother is at the scene.
A security source told French news agency AFP that most employees and customers at the supermarket "managed to flee".
Prime Minister Édouard Philippe said the situation was "serious" and that all signs pointed towards a "terrorist act".
Hundreds of police officers have been deployed to the area, and the vicinity has been cordoned off.
Counter-terrorism prosecutors are leading the investigation but few details have been provided.
France has been hit with several deadly jihadist attacks since 2015 and has been on high alert since. A state of emergency put in place after the 2015 attacks in Paris was lifted in October.
In February, Salah Abdeslam went on trial in Belgium over a shootout in Brussels that led to his capture months after the Paris attacks. He is not expected to go on trial in France until 2020 at the earliest.
Major terror attacks in France
- 1 Oct 2017 - Two women stabbed to death at Marseille railway station; attack claimed by IS
- 26 Jul 2016 - Two attackers slit a priest's throat at his church in Saint-Etienne-du-Rouvray, Normandy. They are shot dead by police
- 14 Jul 2016 - A huge lorry mows down a crowd of people on the Nice beachfront during Bastille Day celebrations, killing 86. IS claims the attack - by a Tunisian-born driver, later shot dead by police
- 13 Jun 2016 - A police officer and his partner are stabbed to death at home by a jihadist, in Magnanville, west of Paris. He declares allegiance to IS, and police later kill him
- 13 Nov 2015 - IS jihadists armed with bombs and assault rifles attack Paris, targeting the national stadium, cafes and Bataclan concert hall. The co-ordinated assault leaves 130 people dead, and more than 350 wounded
- 7-9 Jan 2015 - Two Islamist gunmen storm the Paris offices of satirical magazine Charlie Hebdo, killing 17 people. Another Islamist militant kills a policewoman the next day and takes hostages at a Jewish supermarket in Paris. Four hostages are killed before police shoot the gunman dead. The other two gunmen are cornered and killed by police in a siege.