UPDATE: THE French government says Mohammed Merah, the al-Qa'ida-linked suspect in seven deadly shootings, is dead.
He died in a shoot out with police after he jumped out of a window of the building where he was holed up.A source told AFP earlier that an attempt to negotiate Mr Merah's surrender via someone he knew had failed shortly before the blackout.
Mr Merah, who claimed that he was a member of al Qa'ida and had trained on the Pakistan-Afghan border, had been speaking intermittently with police, reportedly through his apartment door.
Hundreds of police had cordoned off streets around an apartment building in the southwestern city of Toulouse after a pre-dawn raid to arrest the suspect erupted into a firefight.
Three police were wounded and negotiations with the 24-year-old Frenchman of Algerian descent dragged on for hours.
Prosecutor Francois Molins said Mr Merah was a self-taught radical Salafi who expressed glee at killing three Jewish children, a rabbi and three French paratroopers.
Mr Merah had been to Afghanistan twice and had trained in the Pakistani militant stronghold of Waziristan, he said.
In the negotiations, Mr Merah "expresses no regret, only that he didn't have time to have more victims. And he even bragged, he said, of bringing France to its knees", the prosecutor said.
Mr Merah was planning to kill another soldier imminently, so police had to launch the raid, Mr Molins said.
Late on Wednesday (early Thursday AEDT), Interior Minister Claude Gueant told France-2 TV that Mr Merah planned to turn himself in at night "to be more discreet".
Police then turned off nearby street lights.
Mohammed Merah
A TV grab released by French TV France 2 of Frenchman of Algerian descent Mohammed Merah, suspected of a series of deadly shootings in Toulouse and Montauban. Picture: AFP
The gunman's brother and mother were detained early in the day.
Mr Molins said the brother, Abdelkader, had been implicated in a 2007 network that sent militant fighters to Iraq.
French authorities - like others in Europe - have long been concerned about "lone-wolf" attacks by young, internet-savvy militants who self-radicalise online, since they are harder to find and track.
Mr Merah told police he belonged to al-Qaeda and wanted to take revenge for Palestinian children killed in the Middle East, Mr Gueant said, adding the gunman was also angry about French military intervention abroad.
"He wants to avenge the deaths of Palestinians," Mr Gueant told reporters. "He's (also) after the army."
Images of the heartbreak and French reaction to the shootings
The police raid was part of France's biggest manhunt since a wave of terrorist attacks in the 1990s by Algerian extremists.
The chase began after France's worst-ever school shooting on Monday and two previous attacks on paratroopers beginning on March 11.
The suspect repeatedly promised to turn himself in Wednesday, then halted negotiations.
Cedric Delage, regional secretary for a police union, said police were prepared to storm the building if he did not surrender.
Mr Molins said Mr Merah's first trip to Afghanistan ended with him being picked up by Afghan police "who turned him over to the American army who put him on the first plane to France".
An Interior Ministry official, speaking on condition of anonymity, said Merah had been under surveillance for years for having "fundamentalist" Islamic views.
During the standoff, police evacuated the five-story building, escorting residents out using the roof and fire truck ladders.
The suspect's apartment was on the ground floor of the postwar building, locals said.
French authorities said Mr Merah threw a Colt .45 handgun used in each of the three attacks out a window in exchange for a device to talk to authorities, but had more weapons like an AK-47 assault rifle.
Mr Gueant said other weapons had been found in his car.
"The main concern is to arrest him ... take him alive ... it is imperative for us," Mr Delage said.
Those slain at the Jewish school, all of French-Israeli nationality, were buried in Israel on Wednesday as relatives sobbed inconsolably.
The bodies of Rabbi Jonathan Sandler, his sons Arieh, 5, and Gabriel, 3, and 8-year-old Myriam Monsenego had been flown there earlier in the day.
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