Kenyan police say 12 people have been killed in an attack targeting non-Muslims in Mandera county near the Somalia border.
Mohamed Saleh, Mandera's regional commander, said on Tuesday fighters from al-Shabab, the Somali armed group, were suspected of carrying out the attack on the Bisharo Guest House.
Al-Shabab has pledged retribution against Kenya for sending troops into Somalia in 2011 to fight the group, which is waging an armed campaign against Somalia's internationally recognised government.
"This happened very early in the morning, at around 2:30 am local time on Tuesday," said Al Jazeera's Catherine Soi, reporting from Kenya's capital, Nairobi, on Tuesday.
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Witnesses told Al Jazeera they heard several loud explosions and gunshots.
"What we are told happened is that a gunman came and used an explosive device to gain entry into the building," our correspondent said.
"Security officers, police and military came right after the attack to rescue some of the guests on whom a wall had caved in.
"There is now a massive manhunt under way, with counterterrorism police using sniffer dogs to try and track down the attacker."
Al-Shabab's assaults have often been in Kenya's northeast, near the long and porous border with Somalia.
However, al-Shabab has also struck coastal areas popular with tourists and Nairobi, where its fighters attacked the Westgate shopping centre in 2013.
Until Tuesday's attack, Kenyan security forces appeared to have been successful in putting a halt to the wave of attacks.
However, Mandera county remains a volatile area.
Al-Shabab fighters hijacked a bus there in November 2014, and killed 28 non-Muslims on board. In December 2014 they killed 36 quarry workers.
Earlier this month, six people were killed in an al-Shabab attack on a residential building in Mandera.
Source: Al Jazeera News And Agencies