At least two people had been held.
The area around the incident in the 10th arrondissement of Paris was ringed off by police.
The man was described as "determined and violent" and claimed to have a handgun and a bomb according to police, The Guardian reported.
The man is being investigated on multiple counts, including kidnapping and sequestration, attempted homicide and violence with a weapon, the official said.
Paris hostage situation at Rue des Petites Ecurie as man holds two today 2018-6-12 - Live updates
One hostage has a head injury, Yves Lefebvre, a police union spokesman, said.
Authorities provided no details of the raid by specially trained intervention police officers four hours after the hostage-taking began at about 4 p.m.
Videos and images from the scene posted on social media show police officers outside a building in central Paris's Petites Ecuries street, near the rail hub Gare du Nord. Their captor apparently was armed with knives. The attacker, who appeared to be brandishing a fake weapon, had doused his remaining two hostages in petrol, the source said.
According to reports he had demanded to be put in contact with the Iranian ambassador in Paris and that he didn't want any police cars in the vicinity.