A gun battle is taking place between police and unidentified attackers in the diplomatic area of the Bangladeshi capital, Dhaka, officials say.

Three people, including two police officers, have been wounded at a cafe in the Gulshan district, police say.

The Bangladesh Daily Star reported that several gunmen had entered the Holey Artisan Bakery cafe and opened fire.

The US embassy in Dhaka tweeted that there were "reports of shooting and hostage situation".

Police and security forces have sealed off the area.

It is not clear who the attackers are, although a police officer told the BBC that Islamic militants were suspected.

The cafe is described as being popular with expatriates, diplomats and middle-class families.

BBC South Asia editor Jill McGivering says that although high-profile gun attacks are rare in Bangladesh, the latest incident follows a series of murders widely blamed on Islamist extremists.

(BBC)