At least eight people have been killed in the town of Sevare in central Mali after gunmen attacked a hotel, officials say.
The army said the dead included at least three soldiers and two gunmen. An unknown number of hostages are still being held at the Byblos Hotel.
Russia and Ukraine have each said that one of their citizens was being held in the siege.
Mali has been fighting Islamist rebels in the north for a number of years.
Army spokesman Lt Col Diarran Kone told the Associated Press that the operation to free hostages was ongoing.
The BBC’s Alex Duval Smith in Mali says the town, which is about 600km (370 miles) north-east of the capital, Bamako, is a trading hub that serves the historic riverside city of Mopti.
There are several hotels near each other in the town that are popular with UN workers and those working for non-governmental organisations, she says.
A spokesman for the Russian embassy in Mali said one of those being held was a Russian citizen. Earlier, officials in Kiev said a Ukrainian citizen was also believed to have been captured.
The BBC has learned that guests from France, South Africa and Ukraine are registered at the hotels.
UN spokeswoman Radhia Achouri refused to say whether any UN members of staff had been affected or were being held hostage in the Byblos Hotel.
A local resident told the BBC that it was the first time the city has been hit by an attack like this.
“Since the beginning of the fighting in Mali, we haven’t experienced such a situation in Sevare.
“We would expect these things to happen in Gao or Timbuktu, but this the first time it has happened in Sevare,” he said.
Al-Qaeda-linked militants have been fighting the army in northern Mali.
France, the former colonial power in Mali, intervened in January 2013 to stop their advance south to the capital.
Militancy in Mali
- October 2011: Ethnic Tuaregs launch rebellion after returning with arms from Libya
- March 2012: Army coup over government’s handling of rebellion
- April 2012: Tuareg and al-Qaeda-linked fighters seize control of north
- June 2012: Islamist groups capture Timbuktu, Kidal and Gao from Tuaregs, start to destroy Muslim shrines and manuscripts and impose Sharia
- January 2013: Islamist fighters capture a central town, raising fears they could reach Bamako. Mali requests French help
- July 2013: UN force, now totalling about 9,750, takes over responsibility for securing the north after Islamists routed from towns
- July 2014: France launches an operation in the Sahel to stem emergence of jihadist groups
- Sporadic attacks continue in desert area of northern Mali, blamed on Tuareg and Islamist groups