It is believed two armed hostage takers opened fire, killing two, and keeping at least six holed up inside the food market.
The suspects are believed to be those who killed a policewoman in southern Paris on Thursday.
They have been named as Amedy Coulibaly, 32, and Hayat Boumeddiene, 26, and are thought to have connections to the brothers Said and Cherif Kouachi, who killed 12 in the storming of Charlie Hebdo magazine offices on Wednesday.
Said and Cherif are currently involved in their own hostage situation in a factory near Charles de Gaulle airport. They are believed to have one hostage.
Reports from France suggest authorities are fearful that the hostages will be used as an exchange for the release of Said and Cherif, if the two pairs are indeed in communication.
Conflicting reports continue to come in from the French capital, but we will update you on this story as it develops.