DHAKA: Seven militants who killed 20 people at a restaurant in Dhaka were local Bangladeshis and authorities had tried before to arrest five of them, police said, as investigators probed for possible links with international Islamist extremist groups.

The gunmen stormed the upmarket restaurant in the diplomatic zone late on Friday, before killing 20 hostages, including at least nine Italians, seven Japanese and an American.

Islamic State claimed responsibility, warning citizens of "crusader countries" that their citizens would not be safe "as long as their aircraft are killing Muslims", the group said in a statement. It also posted pictures of five fighters it said were involved in the attack. Its claims have not been confirmed.

Security sources said Bangladeshi authorities were investigating any ties between the gunmen and trans-national Islamist extremist groups.

Whoever was responsible, the attack marked a major escalation in violence by militants who have demanded Islamic rule in Bangladesh, whose 160 million people are mostly Muslim. Previous attacks have mostly singled out individuals advocating a secular or liberal lifestyle or religious minorities.

Friday night's attack was more coordinated. The attackers stormed a restaurant in the diplomatic enclave popular with the expatriate community during the final days of the Muslim fasting month of Ramadan.

They ordered all Bangladeshis to stand up before they began killing foreigners, a source briefed on the investigation said. Most of the victims were hacked with machetes before around 100 commandos entered the building, killing six of the militants and capturing a seventh, after a 12-hour standoff, police said.

It was not clear if the attackers had made any demands during the 12-hour hostage standoff.

"All gunmen were Bangladeshi. Five of them were listed as militants and law enforcers made several drives to arrest them," national police chief Shahidul Hoque told reporters in Dhaka late on Saturday.

HOME-GROWN GROUPS

The government has not commented on the IS claim. Up until Friday's attack, authorities had maintained that no operational links exist between Bangladeshi militants and international jihadi networks. Bangladesh has blamed two home-grown groups for the wave of grisly killings over the past year and a half.

One line of inquiry being pursued is whether the attackers received any guidance from Islamic State or al Qaeda, an official in Bangladesh's counter-terrorism wing said.

Police said nine Italians, seven Japanese, two Bangladeshis, an Indian and a US citizen were murdered during the attack at the Dhaka building, split between the Holey Artisan Bakery and the O'Kitchen Restaurant.

Gunmen singled out foreigners inside the restaurant, sparing the lives of locals who were told to recite verses of the Koran, according to survivor accounts told to local media and a source briefed on the police investigation.

Bangladeshi commandoes stormed the building and killed six of the attackers when attempts at negotiations proved fruitless, authorities said. They recovered explosives and sharp weapons from the scene.

Italian media said several of the Italians victims worked in the garment industry and the attack will frighten expatriates working in Bangladesh's $26 billion garment sector that accounts for 80 percent of its exports.

Prime Minister Sheikh Hasina announced two days of national mourning beginning on Sunday and said the country would stand up and fight the "terror threat".