Gunmen armed with automatic weapons and grenades targeted at least seven sites in Mumbai late on Wednesday, opening fire indiscriminately on crowds at a major railway station, the two hotels, the Jewish centre, a hospital and a cafe frequented by foreigners.
Some 370 people have been injured, while the death toll is expected to rise as more bodies are discovered. One security official said eight foreigners were known to have died, among them three Germans, a Japanese, Canadian and Australian.
'Bodies in hall'
Mr Dutt, the director-general of India's National Security Guard, said the Oberoi-Trident was "under our control".
"We have killed two terrorists today," he said. "There was lots of firing, they also lobbed hand grenades. Some of them are unexploded, we are going to defuse them - you may hear some sound of explosions."
Security troops are battling at least one militant still in the hotel
Earlier, the army said at least one gunman with "two or more hostages" remained in the Taj Mahal Palace hotel.
Gunfire and explosions continue to be heard, after more than 100 commandos went into the hotel. A journalist and bystander outside the hotel were taken to hospital after being hit by shrapnel.
Indian commandos who managed to enter other parts of the Taj Mahal say they found at least 30 bodies in one hall.
The commandos also said the militants were well aware of the layout of the hotel, and that they had recovered a Mauritius identity card as well as guns and money.
The relief of the guests at the Oberoi-Trident was evident as 93 of them were escorted from the hotel on Friday morning following the lengthy siege. They included 20 Air France crew members.
One of those freed, Briton Mark Abell, spoke of his delight at seeing several heavily armed soldiers at his hotel door after spending more than 36 hours in his room.
But he was shocked by the state of the hotel. "The lobby was carnage, blood and guts everywhere. It was very upsetting," he told the BBC.
At first light, helicopters swooped over the Nariman House business and residential complex in south Mumbai, which houses the Jewish outreach group Chabad Lubavitch.
FROM THE TODAY PROGRAMME
Commandos initially dropped smoke bombs to create confusion, and then several troops abseiled down ropes to secure the roof.
They are said to have been tentatively moving down through the building, trying not to cause casualties among the hostages.
Earlier, a woman and child were seen leaving the building, but it was unclear whether they had managed to escape or were released.
The child was identified as the two-year-old son of Rabbi Gavriel Noach Holzberg, the main representative at the ultra-orthodox outreach centre. There was no word on the rabbi's fate.
State home minister RR Patil, speaking out the Oberoi-Trident hotel, said a total of nine militants had been killed, along with 15 police officers and two commandos.
He said one of those arrested was a Pakistani citizen.
BOMB ATTACKS IN INDIA IN 2008
30 October: Explosions kill at least 64 in north-eastern Assam
30 September: Blasts in western India kill at least seven
27 September: Bomb blasts kills one in Delhi
13 September: Five bomb blasts kill 18 in Delhi
26 July: At least 22 small bombs kill 49 in Ahmedabad
25 July: Seven bombs go off in Bangalore killing two people
13 May: Seven bombs hit markets and crowded streets in Jaipur killing 63
Earlier, the Indian navy took control of two Pakistani merchant navy ships and began questioning their crews after witnesses said some of the militants came ashore on small speedboats.
India's Foreign Minister Pranab Mukherjee said preliminary evidence "leads us to believe that some elements in Pakistan may be connected to these events".
But he added that it was too soon to give details.
Pakistani Foreign Minister Shah Mehmood Qureshi responded by saying: "This is a collective issue. We are facing a common enemy and we should join hands to defeat the enemy."
The head of Pakistan's powerful military intelligence agency, Ahmed Shuja Pasha, is due to travel to India to discuss the situation with his Indian counterparts.
India has complained in the past that attacks on its soil have been carried out by groups based in Pakistan, although relations between the two countries have improved in recent years and Pakistani leaders were swift to condemn the latest attacks.
A claim of responsibility for this week's attacks - the worst in India's commercial capital since nearly 200 people were killed in a series of bombings in 2006 - has been made by a previously unknown group calling itself the Deccan Mujahideen.
However, most intelligence officials are keeping an open mind as the attacks have thrown up conflicting clues, BBC security correspondent Frank Gardner says.
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.