A member of the French judicial police unit speaks on the phone at the raid scene in Saint-Denis, near Paris, France, November 18, 2015 to catch fugitives from Friday night's deadly attacks in the French capital.

Gunfire and explosions shook the Paris suburb of Saint-Denis early on Wednesday as French police surrounded a building where a Belgian Islamist militant suspected of masterminding last week's attacks in the French capital was believed to be holed up.

A woman died after detonating a bomb at the scene, the French prosecutors' office said, adding that three people in the apartment had been arrested and two others seized nearby.

A judicial source said a second person had died in the pre-dawn raid, but there was no immediate official confirmation.

Armed police and soldiers filled the streets of Saint-Denis, schools and shops were shuttered and residents in the heart of the district were ordered to stay at home.

Police and justice sources said the target of their operation was Islamic State militant Abdelhamid Abaaoud, who was initially thought to have orchestrated Friday's deadly Paris attacks from Syria.

French authorities sent out a bulletin to police across Europe asking them to watch out for a Citroen Xsara car that could be carrying Salah Abdeslam, the fugitive wanted in the attacks.

Local residents spoke of their panic as the shooting started just before 4:30 am.

"We could see bullets flying and laser beams out of the window. There were explosions. You could feel the whole building shake," said a downstairs neighbor from the apartment building where at least one gunman was still believed to be holed up.

She said she heard the people in the apartment above talking to each other, running around and reloading their guns.

"I tried to hide my son beneath me but each time there was shooting he was clawing at my skin," she said, adding that police eventually managed to get them to safety.

Three police officers and a passerby were injured in the assault, which was close to the Stade de France, one of the targets of the Nov 13 attacks.

The coordinated series of bombings and shootings killed 129 people, the worst attack in the country since World War II.

French prosecutors have identified five of the seven dead assailants - four Frenchmen and a man who was fingerprinted in Greece among refugees last month. But they now believe two men directly involved in the assault subsequently escaped.