The gunman who claimed allegiance to the Islamic State group was eventually killed by police, ending the hostage situation.
He is believed to be a Moroccan who was on a watchlist of suspected Islamic extremists after he carried out three separate attacks in the medieval town of Carcassonne and nearby Trebes.
The attacker had began his rampage by hijacking a car in Carcassonne on Friday morning, in which he killed a passenger and injured the driver. He then shot at a group of policeman, injuring one officer before driving to the supermarket, where he opened fire leaving two dead.
He had pledged allegiance to terror group Isis, whose propaganda agency then claimed the attack saying gunman was a "soldier of Islamic State".
"A man shouted and started firing several times," one shopper at the supermarket told FranceInfo radio station.
She added: "I saw an open door for a refrigerated area and I told people to come to shelter there. We were 10 people and we got out by the emergency exit at the back."
French Prime Minister Edouard Philippe said the incident seemed to be an "act of terrorism".
"All the information we have at the moment leads us to believe that this was an act of terrorism," he told reporters.
First, the 26-year-old attacker held up a car just before 10 o'clock this morning in the nearby village of Carcassonne, killing one person and leaving another wounded, according to local media reports. Then, he fired at police officers who were on their way back from jogging , according to Yves Lefebvre, secretary general of SGP Police-FO police union. One soldier was slightly injured after being shot in the shoulder, Lefebvre said.
Then the gunman drove that car to a Super U supermarket in the nearby small town of Trebes, about 100km southeast of Toulouse, where he entered the supermarket. He shot two people dead after he entered the supermarket.
The attacker was able to take a police officer hostage after all other people were able to escape the shop. The police officer swapped himself with a civilian, and was subsequently severly injured in the assault, Interior Minister Gerard Collomb said in a statement.
The man claimed that he carried out the attack in the name of ISIL. According to several sources, the hostage taker demanded the release of Salah Abdeslam, the only surviving member of the November 2015 attacks in Paris, in which 130 civilians and seven attackers were killed.
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