Cherif Kouachi (L) and Said Kouachi (R)
The Paris terror suspects are holed up at an industrial building near Charles de Gaulle airport and two people have reportedly been killed.
Reports also say that 20 people have been injured and Said and Cherif Kouachi have taken a hostage. Police are thought to be negotiating with the suspects.
© Reuters Helicopters with French intervention forces hover above the scene
A conflicting report by Reuters says that one person has been killed, while Paris prosecutors say there are no deaths.
Two planes have aborted landing attempts at the airport as the situation unfolds.
Local people have been asked to stay in their homes and offices, and children are being kept inside their schools.
It follows a car chase on the N2 motorway in which gunshots were fired between the men and police as their stolen car headed towards Paris.
Three helicopters are now hovering over the building in Dammartin-en-Goele near the country's busiest airport.
A close-up image of one of the helicopters shows armed police sitting at the vehicle's open door with heavy weaponry ready
© Reuters A helicopter with members of the French intervention gendarme forces hover above the scene of a hostage taking at an industrial zone in Dammartin-en-Goele
At around 9.40am UK time, they moved away from the building by about half a mile.
France's interior minister has confirmed that an operation to detain the suspects is under way.
In a televised statement Bernard Cazeneuve said: "An operation is under way which is set to neutralise the perpetrators of the cowardly attack carried out two days ago."
© Reuters Members of the French intervention gendarme forces arrive at the scene
Sky's Crime Correspondent Martin Brunt said: "Police seem to have the situation under control and appear to be in contact - or trying to get into contact - with the two men."
Armed police are ordering members of the media to leave the area, saying the situation is too dangerous.
The grey Peugot 206 was stolen from the town of Montagny Sainte Felicite this morning between Crepy-en-Valois and Nanteuil-le-Haudoin.
Almost 90,000 terror police across France are involved in the hunt for the men, believed to be behind Wednesday's terror attack in which 12 people died.