Explosions and gunfire shook a neighbourhood in Toulouse, France, early Thursday morning, as police tried to end a standoff with a suspect believed to have murdered seven people.

Mohamed Merah, 23, has remained inside an apartment building for more than a day, surrounded by heavily armed police officers.

After trying to negotiate with Merah since 3 a.m. Wednesday, riot police set off three explosions outside the apartment building around midnight local time.

More blasts and brief bursts of gunfire followed around 2 a.m.

However, it appeared that Merah was still inside the home.

A government official who spoke to the Associated Press on condition of anonymity said the suspect had recanted an earlier offer to turn himself in when the night fell, and police had blown up the shutters outside the apartment window.

Officials said Merah is believed to be behind the deaths of three paratroopers and a shooting at a Jewish school that killed three children and a rabbi in a string of incidents that began March 11.

Police say that before he barricaded himself, he claimed responsibility for the fatal shootings and said he had been in contact with al Qaeda.

Three officers were wounded in an exchange of fire as police tried to coax Merah out of the building in the early hours of the standoff. While the suspect had tossed a handgun out of a window, reports indicated he was also armed with other weapons such as an AK-A7 assault rifle.

Hundreds of police officers surrounded the five-storey building as emergency crews evacuated residents using the roof and fire truck ladders.

Claude Gueant, the French interior minister, told reporters the suspect is a French citizen of Algerian descent who identifies with al Qaeda militants and "wants to take revenge for Palestinian children" killed in the Middle East. He also has various grievances with the French military, Gueant said.

Prosecutor Francois Molins told reporters the suspect has spent time in Afghanistan and Pakistan, and has reportedly referred to himself as a "mujahedeen," or holy warrior.

According to Molins, on his first trip to Afghanistan, Merah was arrested by Afghan police, turned over to U.S. officials and then put on a plane back to France.

An official with the Interior Ministry, speaking on condition of anonymity, said the suspect had been under surveillance for years.

On Wednesday, police tried to bring in Merah's mother to talk him out of the apartment, but she had refused to do so saying she has "little influence on him." The man's mother and a brother were both detained overnight.

Molins told a Wednesday afternoon news conference that officials uncovered evidence that the suspect was planning to kill another soldier "imminently," which led to the pre-dawn raid.

Molins said the man's brother Abdelkader was also alleged to be part of a network that sent militant fighters to Iraq in 2007.

Molins said that as negotiations carried on with police Wednesday, the suspect expressed regret "that he didn't have time to have more victims. And he even bragged of bringing France to its knees."

"He had foreseen other killings, notably he foresaw another attack this morning, targeting a soldier," Molins added. The suspect claims to have acted alone, he said.

Molins also said Merah has an extensive juvenile record.

Over the last few days, France has maintained a high level terror alert in the southwest region as police investigate the deaths of seven people who were killed in a similar manner.

The first attack came on March 11 when a French paratrooper was killed in Toulouse. Two other paratroopers were killed and one injured last Thursday in the nearby town of Montauban. That incident was followed by a shooting at a Toulouse Jewish school, which claimed the lives of three children and a rabbi.

In each case, the suspect drove a motorcycle and wielded a Colt 45 gun. A different, less powerful weapon was used in the Jewish school shooting.

"Terrorism will not be able to fracture our national community," French President Nicolas Sarkozy declared Wednesday before heading to a funeral for the two paratroopers slain in Montauban.

As the Toulouse raid unfolded, the bodies of the four Jewish school shooting victims arrived in Israel for burial. Relatives sobbed as the bodies of Rabbi Jonathan Sandler, his sons Arieh, 5, and Gabriel, 3, and 8-year-old Myriam Monsenego were buried in a Jerusalem cemetery.

Delivering a eulogy, Israeli parliament speaker Reuven Rivlin said the Jewish people "once again find themselves facing beasts ... driven out their minds by hatred."

With files from The Associated Press