There are links between Islamic State and the man suspected of beheading his boss and trying to blow up a gas plant in south-east France, prosecutors say.
Yassin Salhi was arrested on Friday at the Air Products factory in Saint-Quentin-Fallavier where he worked. He had cited a workplace dispute.
But prosecutor Francois Molins said the evidence indicated a terrorist motive, albeit influenced by personal reasons.
Herve Cornara’s head was found with Islamist flags nearby.
Mr Molins said Mr Cornara had been tricked into getting into the suspect’s van. He was knocked unconscious and then strangled.
He had a long-bladed knife and a gun, the prosecutor said.
About 500m (1,640ft) before he reached the plant, he decapitated his victim, and sent two photos of the remains to a friend in Syria. One was a selfie, and the other included an image of the severed head placed carefully on the torso.
Yassin Salhi, who refused to speak to investigators for almost 24 hours, has said he was acting purely for personal reasons after being reprimanded for dropping equipment from a pallet, according to his lawyer.
But Mr Molins said: “Yassin Salhi decapitated his victim and placed the head of his victim on a fence seeking to extract maximum publicity from his actions.
“This corresponds very closely with instructions issued by Islamic State which regularly calls for terrorist attacks on French territory and for the killing of unbelievers in particular.
“Decapitation is a hallmark of this terrorist group.
“All these elements taken together lead us to perceive a terrorist motive, albeit one justified by personal considerations.”
The van driver who has radical Islamist ties dating back to 2003, drove into the plant with flammable gas canisters, causing an explosion, Mr Molins said.
When firefighters tackled him, he cried out “Allahu Akbar”, the Arabic phrase for “God is great”, he added.
Mr Molins has requested preliminary terrorism charges to be filed against Yassin Salhi.
He has also opened a formal terrorism investigation, which will include looking into his ties with the friend he sent the photos to, a Frenchman identified as Sebastien Younes who has been in Syria since November.
The Friday attack came days after Islamic State militants urged followers to strike during the Muslim holy month of Ramadan and on the same day 38 people were killed in a beach resort in Tunisia, and at least 37 were killed in an attack on a mosque in Kuwait.