Britons were among dozens of hostages taken by gunmen in the attacks on hotels, cafes and a train station. Police said six foreigners had been killed in the violence.
Troops have now surrounded the luxury Taj Mahal Hotel and the Oberoi Trident and are reported to be exchanging fire with the terrorists.
Westerners were rounded up by men armed with machine guns and grenades at seven locations popular with foreign visitors, including the hotels.
The five-star Taj Mahal was on fire last night, with reports that around 40 guests were being held hostage.
Several people were seen being rescued from balconies.
Later in the morning, police loudspeakers declared a curfew around the Taj Mahal hotel, and black-clad commandos ran into the building as fresh gunshots rang out from the area, apparently the beginning of an assault on gunmen who had taken hostages in the hotel.
Ambulances were seen driving up to the entrance to the hotel and journalists were made to move even further back from the area.
Heavy gunfire and explosions were reported there and at the Oberoi hotel, which around 100 elite police officers were understood to have entered last night.
A militant holed up inside the Oberoi told India TV on that seven attackers were holding hostages inside the luxury establisment.
"We want all Mujahideens held in India released and only after that we will release the people," he said.
Witnesses said the terrorists, thought to be linked to al-Qaeda, were specifically targeting British and American visitors.
Police said that more than 80 people had been killed and another 250 injured as blasts and gunfire were heard across Bombay, also known as Mumbai. Indian media put the death toll at 101.
Source: Telegraph
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