A journalist for BFM Paris said two hostages had been taken.
An armed man is believed to have seized at least one hostage in Rue des Petites Ecuries, with armed police and firefighters at the scene.
"The individual has been arrested and the hostages are out of danger", Interior Minister Gerard Collomb said on Twitter.
Using anti-explosive robots up and down the street, police surrounded the area to prevent the hostage taker from escaping, CNN reported.
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There initially were three hostages, but one was reportedly freed shortly after the hostage-taking began at about 4 p.m.in the office of a startup, police union official Yves Lefebvre said. Police swept vehicles in the area with a device but found nothing, he said. A Paris police official told CBS News there was no immediate indication of a link to terrorism, however members of the force's elite serious crime unit, known as the BRI, were on the scene.
The man reportedly asked to speak to the Iranian embassy to deliver a message to the French government, Reuters reports.
The Evening Standard reports the attack doused the remaining two hostages in petrol.