At least one suspected Islamist launched a daylight raid on a gas factory in eastern France Friday, pinning a decapitated head to the gates and injuring at least two others with explosive devices.
"The intent was without doubt to cause an explosion. It was a terrorist attack," said President Francois Hollande in Brussels, cutting short an EU summit to hold emergency meetings in the French capital.
Hollande said a vehicle driven at high speed by "one person, maybe accompanied by another" smashed into the factory, around 40 kilometres (25 miles) from France's second city Lyon.
"At the time I am speaking, there is one dead and two injured," said a grim-faced Hollande, calling for "solidarity" for the victim, who was found with Arabic inscriptions on him.
The 35-year-old attacker, identified as Yacine Salhi, had been known to security services for a number of years but did not have a criminal record, Interior Minister Bernard Cazeneuve said.
He was taken into custody and an anti-terrorist probe has been launched, he said.
The gruesome killing came nearly six months after the Islamist attacks in and around Paris that left 17 people dead and started with a shooting at satirical magazine Charlie Hebdo.
For months, Europe has been on high-alert for so-called "lone wolf" attacks that are very difficult to prevent after Islamists urged supporters to carry out assaults wherever they could.
"There was a decapitated body with inscriptions," said Hollande, although sources close to the enquiry said it was not clear whether the victim was transported to the site or whether the beheading was carried out at the factory site.
"A flag with Arabic writing on it was found at the scene," said Cazeneuve, and the text was being translated.
The suspect entered the factory owned by American group Air Products and set off several small explosive devices, sources close to the investigation said, with at least two people hurt in the assault.
Police said it was unclear whether the attacker was acting alone, or had accomplices.
Security services drew up a file on the suspect in 2006 for radicalisation, but he had no criminal record, said Cazeneuve, who went immediately to the scene.
He had a "link" to the Salafist movement, an extreme form of Sunni Islam, Cazeneuve added, stressing that the investigation was in its early stages.
Prime Minister Manuel Valls, who is on an official trip in South America, ordered security measures stepped up at all sensitive sites in the area.
The attack occurred around 10:00 am local time (0800 GMT), according to local media, in the small town of Saint-Quentin-Fallavier, near Lyon.
"This is a small town and a large industrial zone. There's never been any concern in the region. We're all surprised. We're really in shock this morning," an employee at a nearby business told rolling news channel BMFTV.
France has been on high alert since January 7 when two Islamist brothers attacked Charlie Hebdo, killing 12. A policewoman and four hostages in a Jewish supermarket were also killed during the three-day attacks.
The January attacks drew record crowds onto the streets of Paris in a historic "march against terrorism".
Nearly four million people marched through the streets of France and more than 1.5 million in the French capital along with dozens of world leaders to express defiance in the wake of the attacks.
World leaders began reacting to the news only a few hours after the attack, with Spanish Prime Minister Mariano Rajoy saying that "barbarism will always be confronted by unity among democrats."
France has a high proportion of people that have gone to fight alongside Islamists in Iraq and Syria and has the biggest Muslim population in Europe.
Earlier this week, the country passed a controversial new spying law granting sweeping powers to snoop on citizens.
The new French law allows authorities to spy on the digital and mobile communications of anyone linked to a "terrorist" inquiry without prior authorisation from a judge, and forces Internet service providers and phone companies to give up data upon request.
Intelligence services will have the right to place cameras and recording devices in private dwellings and install "keylogger" devices that record every key stroke on a targeted computer in real time.