Scores of tourists remained trapped in the Taj Mahal hotel, a 105-year-old city landmark, and the five-star Trident Oberoi in Mumbai's downtown peninsula, its financial and tourist heart, officials said.

At least 101 people had been killed, including six foreigners, police said. Another 287 people were wounded in the attacks, claimed by the little-known Deccan Mujahideen group.

Small groups of militants armed with automatic weapons and grenades burst into the luxury hotels, a hospital and a railway station late on Wednesday, as well as a famous cafe popular with foreign tourists, firing indiscriminately and tossing grenades.

"There are many people trapped inside the two hotels it seems, and we are hearing reports of constant gunfire, mostly from the Taj hotel," a duty officer at the Mumbai police control room said.

The attackers appeared to target British and Americans as they sought hostages before settling in for a prolonged siege. Police later said an Israeli rabbi and his family were being held hostage in a Mumbai apartment.

Television footage showed gunmen in a pick-up truck spraying people with rifle fire as the vehicle drove down a Mumbai street.

Hotel staff were seen evacuating wounded on luggage trolleys, with passers-by covered in blood after they rushed to help.

Other distressed guests stood at hotel windows, although a slow trickle could later be seen leaving the Taj hotel through a back gate, surrounded by heavily armed troops and police.

Schools were closed and a curfew was imposed around the Gateway of India. But train services were running as normal taking people to work in the stunned city.

Witnesses said the attackers were young South Asian men speaking Hindi or Urdu, suggesting that they were probably members of an Indian militant group rather than foreigners.

As dawn broke on the red, white and grey brick facade of the Taj on Mumbai's waterfront, the hotel was surrounded by armed police, ambulances and fire engines. Intermittent gunfire could be heard and flames licked from the roof of the hotel.

At least two guests, trapped in their rooms in the Taj, phoned TV stations. One said the firedoors were locked, another said he had seen two dead bodies by the swimming pool.

"Two of my colleagues are still in there and the last we heard from them was three hours ago and then the phone battery died," said a German national who escaped the Taj.

Rakesh Patel, a British witness who was staying at the Taj Mahal hotel on business, said the attackers were looking for British and US passport holders.

""They came from the restaurant and took us up the stairs. They had bombs," he told the a TV channel.

"Young boys, maybe 20 years old, 25 years old. They had two guns," he said, smoke stains covering his face.

The attacks came amid a slew of state elections, including in disputed Kashmir, and could be an embarrassment for the ruling Congress party ahead of national elections next year.

Strategic expert Uday Bhaskar said the attacks had grave socio-economic implications for India.

"The fact that they were trying to segregate British and American passport holders, definitely suggests Islamist fervour," Bhaskar said.

In Mumbai, officials admitted the battle was not yet over.

Mumbai has seen several major bomb attacks in the past, but never anything so obviously targeted at foreigners.

Japan's foreign ministry said at least one Japanese national had been killed and one injured in the attacks, while South Korea said 26 of its nationals had escaped unharmed. Australian said two of its nationals had been injured but the toll could rise.

In Washington, the White House and U.S. President-elect Barack Obama condemned the attacks, as did France, current president of the European Union, and United Nations Secretary General Ban Ki-moon.