POLICE have cornered the serial killer suspected of murdering seven people, including three young children.
French special forces today surrounded a house in Toulouse where the 24-year-old is holed up.
The suspect, named as Algerian Mohammed Merah, exchanged fire with police, leaving two injured.
He later threw a handgun out of a window but is believed to have other weapons.
Negotiations were continuing and police said they want to take him alive.
Merah is suspected of killing three Jewish schoolchildren -- including 8-year-old Miriam Monsonego (inset) -- a rabbi and three paratroopers.
According to reports, Merah has told police "he belongs to al-Qaida".
French police exchanged fire and were negotiating with the gunman suspected of killing three Jewish schoolchildren, a rabbi and three paratroopers.
The 24-year-old suspect, believed to be of Algerian descent, is holed up in a building in Toulouse surrounded by armed police.
He has thrown his handgun out of a window but has other weapons. A police negotiator said the gunman indicated he'll surrender in the afternoon.
Two police officers have been injured in the raid on a house in the southwest city of Toulouse, French Interior Minister Claude Gueant said.
The suspect is Mohammed Merah (24) a French national, who says that "he belongs to al-Qa'ida," Mr Gueant said.
He said the suspect "wants to take revenge for Palestinian children" killed in the Middle East, and is angry at the French army for its operations abroad.
The man was known to authorities for having spent time in Afghanistan and Pakistan, Mr Gueant said.
Officers brought the suspect's mother to the scene and tried to get her to help negotiate, but she refused, saying "she had little influence on him".
Some 300 police moved into the residential neighbourhood in northern Toulouse ahead of the raid, Didier Martinez of the SGP Police union said.
Authorities have been conducting a massive manhunt across southern France after seven people were killed in three attacks over the past several days, and France's terror alert level was raised to its highest level ever in the region.
A French paratrooper was killed in Toulouse on March 11, two other paratroopers were killed and one injured on Thursday in the nearby town of Montauban, and three children and a rabbi were killed in a shooting at a Jewish school in Toulouse on Monday.
The suspect in the attacks drove a powerful motorcycle, and the same weapon, a Colt 45, was used in all three shootings.
Police arrived last night to raid the house in Toulouse, near the site of the first killing.
"When they arrived ... the wanted individual shot at the door," Mr Gueant said.
"We heard gunfire three times, and we turned on the television.
"Then, the police phone to say to stay in the house," said Wafia Bendali (26) who lives on the third floor of the large residence where the raid was in progress.
She said she believed the suspect lived on the first floor. She said police were in the street.
Another neighbour, Farida Boumama (48) said her family woke up to voices at 3am and heard gunfire an hour later.
"I went to open the window to look out and police shouted, 'Go inside and close the shutters,'" she said.
One officer was injured in the knee and another officer was lightly injured in ensuing exchanges of fire.
For years the main terrorist threat that French authorities have been concerned about has been al-Qa'ida in the Islamic Maghreb, which grew from an extremist group in the former French colony of Algeria.
While the Toulouse raid was under way, the bodies of the four victims of the school shooting arrived in Israel for burial.
The three children and a rabbi will be buried in a Jerusalem cemetery today.
The bodies of the rabbi, two of his children and a daughter of the school's principal were accompanied to Israel by French Foreign Minister Alain Juppe.