Armed terrorists have been holding as many as 20 hostages, including some foreigners, at a cafe in a diplomatic zone of Bangladesh's capital for more than eight hours. The standoff followed a gunbattle with police that left at least two senior officers dead and 40 people injured.

Reports said two Sri Lankans were also among the people held by the terrorists.

ISIS claimed responsibility for the terror attack, according to Amaq, an ISIS media branch, but some officials cast doubt on the claim.

As police exchanged fire with the gunmen, the attackers threw explosives at officers, a source at the scene said.

At about 8:30 p.m. local time Friday, gunmen attacked the Holey Artisan Bakery, a cafe popular with expats. After they entered the restaurant, they took the people inside hostage, cafe owner Sumon Reza told CNN. Reza said he managed to escape as six to eight gunmen entered. About 20 people, some of them foreigners, were in the restaurant.

The Bangladeshi Police was contemplating a counter terror operation by dawn.

(With inputs from CNN)