According to police, about five armed men entered Holey Artisan Bakery, a restaurant popular with foreigners, and opened gunfire around 9:20 PM (local time).
Several foreigners are feared to have been taken hostages inside the restaurant, police said.
A large number of policemen and Rapid Action Battalion cordoned off the restaurant.
The attackers hurled bombs and were firing intermittently, injuring some policemen and people.
A kitchen staff of the bakery, who managed to escape, said several armed men entered the restaurant around 8:45 PM and took the chief chef hostage, local media reported.