An armed gang is holding up to 150 people hostage after seizing a school in southern Russia.
Some of the children managed to flee the hostage-takers
Several people are reported to have been killed after about 17 masked men and women stormed the secondary school in Beslan, North Ossetia.
Many students are among the hostages but the gang is thought to have allowed 15 children to leave.
The attackers are said to be demanding the withdrawal of Russia troops from neighbouring Chechnya.
Pupils have reportedly been lined up against the windows to prevent an assault by security services, says the BBC's Moscow correspondent Damian Grammaticas.
The gang has also threatened to kill children if any of them are hurt by security forces, a regional official said.
"They have said that for every fighter wiped out they will kill 50 children and for every fighter wounded, 20," Interior Minister Kazbek Dzantiyev was quoted by Reuters news agency as saying.
The attack comes amid heightened security in Russia after a suspected suicide bombing in Moscow on Tuesday night and the mid-air explosions of two passenger planes last week.
New school term
Wednesday was the beginning of the school term for millions of children across Russia and parents also attend what is traditionally a day of celebration.
The attackers burst into the secondary school in Beslan at around 0930 local time (0530 GMT), shortly after a ceremony welcoming in the new school year.
"We were standing in lines next to the gates. Music was being played," pupil Zaurbek Tsumaratov told RTR Russia TV after managing to escape.
"I saw three people running in there with sub-machine guns. At first I simply thought it was a joke. Then they began to fire in the air and we ran away."
More than 200 pupils, parents and teachers were said to have been moved to the school gym. Up to 50 children were able to flee during the move, according to reports.
Russian security forces and police troops were surrounding the building in Beslan, a town 15km (10 miles) north of Vladikavkaz, capital of the North Ossetia republic, which borders Chechnya.
The attackers were believed to have laid mines and trip wires, threatening to blow up the school if stormed by police.
Gunfire and explosions could be heard in the area.
Russia's Itar-Tass news agency said a regional Muslim community leader was brought in to negotiate, but the hostage-takers refused to talk to him saying they would only deal with top officials.
Later, the agency reported 15 children had been released.
Putin under pressure
Russian President Vladimir Putin broke off a working holiday on the Black Sea to return to Moscow after the school siege began.
Our correspondent in Moscow says the president now has a major crisis on his hands, and will be under pressure to bring the stand-off to a peaceful conclusion.
It was not immediately clear who the gunmen are, but correspondents say it bears the hallmarks of Chechen rebels.
RECENT DEADLY ATTACKS
31 Aug 2004 - Suicide bomb kills 10 at north Moscow train station
24 Aug 2004 - Two planes crash after leaving same Moscow airport, killing 89
May 2004 - Chechen president killed in blast at stadium in Grozny
Feb 2004: Bomb attack kills at least 39 people on Moscow underground
Dec 2003 - female suicide bomber kills five near Red Square
They have a history of taking hostages to draw international attention to their demands for independence from Russia - the most notorious incident being the Moscow theatre siege in 2002, which left 129 hostages dead.
The latest siege comes a day after a suspected suicide bomb attack at a train station in north Moscow, which killed at least 10 people and injured more than 50.
An Islamist group, calling itself the Islambouli Brigades, claimed responsibility and described the attack as "part of the wave of support and assistance to the Muslim Chechens".