Mark Dummett reports from the tense streets of Dhaka
Bangladesh's prime minister has offered a general amnesty to border guards to try to end the mutiny at their HQ in the capital, Dhaka.
Representatives who met Sheikh Hasina at her office have reportedly agreed the mutineers will lay down their arms.
They have returned to the barracks with the PM's offer.
Three people died and a number were wounded in the mutiny, which was said to be over pay, conditions, career advancement and alleged discrimination.
It came a day after Sheikh Hasina visited the HQ to hand out medals.
Sheikh Hasina and senior ministers met 14 of the renegade Bangladesh Rifles (BDR) troops at her office after they were escorted there from the HQ.
The prime minister offered the general amnesty and urged the paramilitaries to set free officers they had taken hostage.
She agreed to consider their demands, minister Jahangir Kabir Nanak told reporters.
The representatives of the mutineers have returned to the HQ but there is no confirmation that the mutiny has ended and there has been no release of hostages yet. The site is still surrounded by security forces.
The mutiny started with heavy fighting at about 0930 local time (0330 GMT). An army helicopter patrolling above the barracks was shot at and mortar rounds were also fired.
Police and the regular army were deployed at the BDR's HQ. The barracks holds 2,000-4,000 troops.
One of the mutineers, who did not want to be named, called the BBC Bengali service and said the action was because of discrimination against BDR troops by the regular army, who make up the officers.
"These army officers have been practically looting our resources for 200 years. It's torture, mental torture, using the fear of losing our jobs," he said.
"If the government is humane… well, the BDR has no clash with the government."
The mutineers say the BDR rank and file were denied permission to speak to Sheikh Hasina when she visited.
One BDR member was heard addressing the mutineers by megaphone: "Brothers, let's stay together. The army is trying to come in, and we will stop them by any means."
There were reports that some of the paramilitaries also stormed out of the complex and seized the nearby shopping centre.
Three people are confirmed dead, at least one of them a BDR officer, medical officials said.
There were fears for dozens of students between the ages of five and 16 who were trapped in a school inside the compound.
Anxious parents gathered near the site. Monira Khatoon, the mother of a 10-year-old boy, told Associated Press news agency: "I'm so worried about my son... I pray no harm will be done."
'Running for safety'
The BBC's Mark Dummett at the scene said streets and shops were closed near the site in the Pilkhana area of Dhaka.
Sheikh Hasina visited the barracks on Tuesday
Our correspondent says there is no indication that this was a coup attempt. Bangladesh has witnessed many successful and failed coup attempts.
However, security was tightened at other BDR barracks around the country and India said it had put its own Border Security Force on alert.
One witness of the mutiny, Suborna Barua, told the BBC: "I saw a bullet hit the glass door of a private university. Hundreds of parents waiting for their children were shouting and running this way and that for a safe place."
Another, Naziha Syed, said: "I saw soldiers walking around in the street in front of my house. They camped in the mosque across the street. Two stray bullets hit my home, one of them almost injuring my uncle."
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