Mutinous border guards opened fire inside their headquarters and seized a shopping mall in the Bangladeshi capital of Dhaka on Wednesday, killing one person and wounding several others in an apparent pay dispute, officials said.
The army moved in to quell the unrest.
Sajjad Haider, a spokesman for Bangladesh Rifles, the official name of the paramilitary border guards, said gunfire erupted inside the agency's Dhaka headquarters compound and that "the army has moved in to deal with the situation."
Security officers said that dozens of students, aged from 5-16, were trapped inside their school on the compound.
Intermittent gunshots rang out at the headquarters nearly four hours after the start of violence, and smoke billowed from the compound.
Guards reached inside the compound by phone said they were upset that their officers had not raised their demands for equal pay and working conditions as army soldiers when Prime Minister Sheikh Hasina visited the headquarters the day before.
Hundreds of army troops took positions outside the nearby shopping mall seized by the guards, while others closed all roads in the area to traffic and urged residents to move out.
"The army troops have to move very cautiously so no harm is done to the students stranded in the school," said the officer at the scene, speaking on condition of anonymity according to military rules.
Most of the students are children of the border guards , but there are also other children attending the school.
Hundreds of anxious relatives of the students gathered near the compound, waiting for news. It was not immediately clear if the students were being held hostage.
"I'm so worried about my son," said Monira Khatoon, mother of a 10-year-old boy stranded inside the school. "I pray no harm will be done."
A rickshaw driver, who was shot outside the compound, died at state-run Dhaka Medical College Hospital, doctors said. Three bystanders and one border guard were being treated at the hospital for wounds, doctors said on condition of anonymity, citing protocol.
Bangladeshi Prime Minister Sheikh Hasina's newly elected government urged the guards to lay down their arms and return to their barracks, offering to discuss their demands, according to a statement from the Bangladeshi military.
Later, two government members were seen going into the compound for negotiations.
Among the guards' demands are more food rations and a chance to participate in lucrative, high-paying United Nations peacekeeping missions.
"We will end our siege only if the prime minister comes to us and assures us of meeting our demands," a border guard with a yellow handkerchief tied around his face told the private TV station Bangladesh Vision.
Bangladesh, an impoverished nation of 150 million people, has a history of military coups and political assassinations. Two of the South Asian nation's presidents have been slain in military takeovers and there have been 19 failed coup attempts since the country gained independence from Pakistan in 1971.
An ETV correspondent at the scene earlier said guards came out of their barracks and seized a conference hall where their officers were meeting.
Television footage recorded from nearby rooftops showed some border guards with rifles moving around inside the compound. Army soldiers had there guns trained on the four gates leading to the compound.
Ilias Ahmed, who lives in apartment building just outside the border guards compound, said he saw vehicles burning inside.