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Police said several masked gunmen stormed the headquarters of Charlie Hebdo in Paris shooting indiscriminately.
Eleven people have been shot dead in an attack at the offices of a French satirical weekly which angered some Muslims after publishing crude caricatures of Islam's Prophet Mohammed.
Prime Minister David Cameron joined the condemnation of the attack, saying: "The murders in Paris are sickening. We stand with the French people in the fight against terror and defending the freedom of the press."
Deputy Prime Minister Nick Clegg said the killings were a "barbaric attack on freedom of speech".
"My thoughts are with the victims, their families and their colleagues," he said.
The publication has launched a series of attacks on Muslim extremism and the last tweet on its profile
In it he wishes everyone "good health".
French president Francois Hollande said it was a "terrorist attack" which had left France in a state of shock.
He said: "At this moment we have 11 people killed, four critically injured. This is not the final figure.
"At least 40 people have been saved - we don't know the exact number of victims."
He said the French government would be holding an emergency meeting at the Elysee Palace and the security level in Paris had been raised.
He said: "We are looking for the perpetrators of this crime.
"France is today in shock, in front of a terrorist attack.
"This newspaper was threatened several times in the past. We need to show that we are a united country. We have to be firm, we have to be strong.
"We are at a very difficult moment. Several terrorist attacks have been impeded during the previous weeks. We are threatened because we are a country of freedom.
"We fight threats and we will punish the attackers.
"Eleven people are dead. We will look for the people responsible."
David Chour told the BBC from close to the scene: "A lot of people from the shops heard a lot of gunshots.
"Two guys entered with Kalashnikov guns and shot the people. I haven't seen them directly but people around said they just went away.
"People are very shocked. It is pretty serious."
Local news outlets report the Secretariat General de la Defense et de la Securite Nationale has raised the status of its Vigipirate plan - the French national security alert system - to "alerte attentat", the highest level, across the entire Ile-de-France region around Paris.
The shootings in the French capital come shortly after an outbreak of opportunist attacks in crowded spaces across France - prompting fears that copycat attacks could be launched in the UK.
British security services are likely to be in contact with French counterparts once a clearer picture of the latest attack is formed.
Late last month, a van burst into a Christmas market in the western city of Nantes , injuring 10 people before the driver reportedly began stabbing himself.
In the eastern city of Dijon, a driver reportedly shouting ''God is great'' in Arabic ran down several people, injuring 13 before coming to a stop.
Those incidents came after an attacker knifed three police officers in Tours before he was shot dead by one of the officers.
The French government denied links between the attacks but announced plans to further raise security in public spaces, including the deployment of around 300 soldiers.
Ed Miliband said he felt "horror and outrage" about the attack after Mr Cameron led condemnation in the Commons at prime minister's questions.
"We stand in solidarity with the people of France against this evil terrorist attack by people intent on attacking our democratic way of life and freedom of speech," the Labour leader said.
"We are united in our determination to beat them."
London mayor Boris Johnson said: "Shocked and appalled by senseless attack at Charlie Hebdo - London stands with Paris and the people of France against this horrific scourge."
Mr Cameron told MPs: "This House and this country stands united with the French people in our opposition to all forms of terrorism and we stand squarely for free speech and democracy.
"These people will never be able to take us off those values."
Videos have emerged from the scene in which repeated shots could be heard, while others cower for safety on a rooftop.
In another video, footage appears to show a police officer getting shot at close range, before two masked men dressed in black get into a car.
One excerpt, from journalist Martin Boudot on a building located near the magazine headquarters, appears to contain footage of one of the men shouting "Allahu Akbar" - meaning God is the greatest.
Witnesses at the magazine headquarters have described the scene on social media.
Peter Allen wrote: "Bullet holes and smashed windows all around scene of Charlie Hebdo massacre in Paris. Police sirens non-stop as terrorist alert raised to max."
In a statement, the Muslim Council of Britain said it condemned the attack.
A spokesman said: "Whomever the attackers are, and whatever the cause may be, nothing justifies the taking of life."
Gilles Boulanger, who works in the same building as the Charlie Hebdo offices, likened the scene to a war zone.
He told the BBC: " A neighbour called to warn me that there were armed men in the building and that we had to shut all the doors.
"And several minutes later there were several shots heard in the building from automatic weapons firing in all directions.
"So then we looked out of the window and saw the shooting was on Boulevard Richard-Lenoir, with the police. It was really upsetting. You'd think it was a war zone."
