"The terrorists have used automatic weapons and in some places grenades have been lobbed. The encounters are still going on and we are trying to overpower them," A.N. Roy, a senior police officer, said."
Malay Desai, a correspondent for the Mumbai Mirror, told Al Jazeera: "There are reports of panic on the roads.
"Not all of the members of the planned operation have been gunned down yet, a lot of them are still roaming around the streets in Mumbai, firing at will and creating panic among the people of Mumbai."
He confirmed that there had been a blast outside the city's airport, saying it was a "peak time for flights coming from the West to Mumbai".
A group calling itself the Deccan Mujahedeen claimed responsibility for the attack, the AFP news reported, but Mahan Abedin, an insurgency analyst, told Al Jazeera: "At this stage, that name does not necessarily mean that much. I've never heard of that group."
'Westerners held hostage'
Hemant Karkare, the chief of the police anti-terrorist squad in the city, was killed during the attacks, Indian television channels reported.
Three members of staff were shot dead at the luxury Taj Mahal hotel in Colaba district, the Press Trust of India reported.
Westerners were also being held by armed men at the venue, according to media reports.
"They wanted anyone with British or American passports," one witness at the hotel told the NDTV Indian news channel. "They wanted foreigners."
Kashif Khusro, a journalist for the Times Now newspaper, told Al Jazeera hostages were being held at the city's Trident hotel.
He said: "Army commanders have surrounded the luxury hotel - there are three hostages inside.
"Three of the gunmen have been shot. The gunmen inside are armed with automatic weapons."
Another three people died in a bomb blast in a taxi in the south east of the city.
Speaking from Mumbai, Al Jazeera's Riz Khan said: "This was a serious attack by people armed with AK47s.
| The chief of the police anti-terrorist squad was killed in the attacks [Reuters]
"The police were taken by surprise ... they are not equipped for this. The attacks would have been organised as they struck several areas at once."
He said landmarks and heavily populated areas had come under attack.
"Seeing these two major landmarks - the Taj Mahal and Oberoi hotels - on fire is psychologically damaging for people in India and is comparable to the affects the September 11 attacks had on Americans in 2001."
One woman, who gave her name as Souad, escaped an attack on the Oberoi hotel in the city.
She told Al Jazeera: "We heard no alarms, nothing. My husband opened the door and we couldn't see outside - it was so dark with all the smoke - we couldn't breathe.
"We were on the 17th floor of the hotel and we used towels to protect ourselves and then ran and got a taxi and then we just drove as far away as we could."
Police said there were reports of shootings in other parts of the city, including some in five-star hotels.
Al Jazeera's Matt McClure said: "There was at least five attacks - the largest on a Mumbai railstation and there were three on large, luxury hotels.
"It seems clear what the intent is here - to sow fear and leave people worried and thinking 'nowhere is safe'.
India has witnessed a series of co-ordinated attacks in recent months.
A little-known Islamic group, the Islamic Security Force-Indian Mujahedeen, claimed responsibility for serial blasts last month in which 80 people died in India's northeast state of Assam.
A total of 12 explosions shook the northeastern state, six of them ripping through crowded areas in the main city of Guwahati.
Six weeks earlier, the capital New Delhi had been hit by a series of bombs in crowded markets that left more than 20 people dead, the attacks were claimed by a group calling itself the Indian Mujahedeen.