Heavy, sustained gunfire was heard as soldiers rushed into the lobby to flush out the remaining few gunmen.
"There were three terrorists, we have killed them," the chief of India's elite National Security Guard commandos, JK Dutt, said later.
"There was [a] lot of shooting. Grenades were lobbed and explosives were used by the terrorists."
He said that the gunmen had set fire to hotel rooms whenever his commandos were bearing down on them.
Firefighters worked to contain fierce flames that billowed from the building's lower floors.
The stand-offs began late on Wednesday when small groups of gunmen armed with automatic weapons and grenades opened fire indiscriminately at sites around the city, which also included a hospital and a cafe frequented by foreigners.
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
Most of the dead and the 295 injured are Indian citizens. At least 22 foreigners are known to have died, including victims from Germany, Japan, Canada, Australia, Italy, Singapore, Thailand and France. One Briton, Andreas Liveras, has been killed.
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 - was 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.
Indian officials believe at least 10 militants were involved in the attacks after early reports of around 20 attackers. Reports suggest some gunmen launched attacks in different places.
Vilasrao Deshmukh, chief minister for the surrounding state of Maharshta, said: "Nine were killed and one was captured."
Hemant Karkare, head of India's anti-terrorist squad, was cremated on Saturday. He died confronting the militants with his men, Indian media report.
Indian Prime Minister Manmohan Singh has been holding an emergency meeting with his armed forces and intelligence chiefs to discuss the Mumbai attacks.
Mr Singh has already said he believes a group based outside India was behind the killings and senior Indian politicians say the only surviving gunman to be captured is from Pakistan.
Pakistani President Asif Ali Zardari pledged to act swiftly if given any evidence of involvement by Pakistani groups or individuals in the attacks.
His foreign minister, Shah Mahmood Qureshi, condemned the attacks as "barbaric".
Earlier, Pakistan reversed a decision to send its intelligence chief to India to help with the investigation, following domestic criticism. It will instead send a lower-ranking representative.
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.