Two people have died during a police raid on a flat in Paris suburb Saint-Denis, while seven arrests were made.
A woman has blown herself up and a suspect was shot dead.
Police targeted the flat in Saint-Denis in a search for Abdelhamid Abaaoud, the alleged mastermind of last week’s attacks in Paris, when 129 people were killed.
The fate of Abdelhamid Abaaoud, previously thought to be in Syria, is still unclear.
A government spokesman said remains of a third body may be under the rubble.
Prosecutor Francois Molins announced earlier that intelligence indicated Abdelhamid Abaaoud was in Paris.
All victims of the attacks – which targeted a concert hall, cafes and the Stade de France stadium and were claimed by ISIS – have now been identified, the government said.
The operation in Saint-Denis – where the Stade de France is located – began at 04:20 local time.
Speaking from the scene afterwards, Francois Molins said it had been ordered after phone taps and surveillance operations suggested Abdelhamid Abaaoud, a Belgian of Moroccan descent, could be there.
The prosecutor said a young woman – said by France’s BFMTV to be a relative of Abdelhamid Abaaoud – had detonated her explosives belt soon after the raid began.
Another suspect was killed by grenades and police bullets, Francois Molins said.
The spokesman for the French interior ministry, Pierre-Henry Brandet, later told French TV station BFMTV that work was being done to establish whether the remains of a “third terrorist” were buried in the rubble.
Five members of the RAID police anti-terrorism unit were lightly injured while a RAID “assault dog”, a seven-year-old Belgian Shepherd called Diesel, was killed.
Three men were arrested in the apartment. Two others were found hiding in rubble and a further two – including the man who provided the lodging – were also detained, he said.
He did not give the identities of those detained.
As the operation got under way, roads were blocked off around Rue de la Republique in Saint-Denis, by truck-loads of soldiers and armed police.
Local residents, who were urged to stay indoors, spoke of hearing continuous gunshots and large explosions.
Amine Guizani told the Associated Press: “They were shooting for an hour, non-stop. There were grenades. It was going, stopping, Kalashnikovs, starting again.”
French Interior Minister Bernard Cazeneuve praised the security forces for operating “under fire for a number of hours in conditions that we have never seen before today”.
