People were seen fleeing the area on the edge of the capital Bissau, near the airport.
Local markets were closed and banks shut their doors, while military vehicles laden with troops drove through the streets.
But the president later told AFP in a brief telephone call: "All is well" and added that the situation is "under control".
The cabinet announced Embalo would speak to the nation from the government palace on Tuesday evening and invited reporters to attend the speech there.
According to various accounts, in the early afternoon, armed men were seen entering the government palace which houses different ministries.
Some witnesses described the gunmen as military, others as civilians.
Gunfire followed for a large part of the afternoon when the complex was surrounded.
An AFP reporter was warned to leave the area by a man carrying a gun who took aim at him.
The former Portuguese colony is an impoverished coastal state of around two million people lying south of Senegal.
It has seen four military putsches since gaining independence in 1974, most recently in 2012.
In 2014, the country vowed to return to constitutional government, but it has enjoyed little stability since then and the armed forces wield substantial clout.
A 36-year-old Frenchwoman living in Bissau, Kadeejah Diop, said she rushed to pick up her two children from school and witnessed armed troops entering the government complex.
"They made all the female workers leave. There was a huge panic," she told AFP by phone from her home. "Right now, we are holed up indoors. We have no news."
Troops set up a security perimeter around the palace and kept people away.
A journalist, asking not to be named, reported that at the start of the afternoon the public television center had been occupied by soldiers who refused to let staff leave. It was not clear if they were part of the coup bid or government loyalists.
African Union Commission chief Moussa Faki Mahamat expressed deep concern over the "attempted coup".
An AU statement said he was following "with deep concern the situation in Guinea Bissau, marked by the attempted coup d'etat against the government".
Embalo, a 49-year-old reserve brigadier general and former prime minister took office in February 2020 after winning a second-round runoff election that followed four years of political in-fighting under the country's semi-presidential system.
He was a candidate for a party called Madem, comprised of rebels from the African Party for the Independence of Guinea and Cape Verde (PAIGC) which had led Guinea-Bissau to independence.
His chief opponent, PAIGC candidate Domingos Simoes Pereira, bitterly contested the result but Embalo declared himself president without waiting for the outcome of his petition to the Supreme Court.
Late last year, the chief of the armed forces said members of the military had been preparing to launch a coup while the president was on a working trip to Brazil.
Troops had been offering bribes to other soldiers "in order to subvert the established constitutional order", armed forces head General Biague Na Ntam said on October 14.
The government spokesman denied his account the following day.
In addition to volatility, Guinea-Bissau struggles with a reputation for corruption and drug smuggling.
Its porous coastline and cultural ties have made it an important stop on the Africa trafficking route. In 2019, nearly two tonnes of cocaine were seized.
Three countries in West Africa -- Mali, Guinea, and Burkina Faso -- have experienced military takeovers in less than 18 months.
The region's mounting instability is due to discuss on Thursday at an ECOWAS summit in Accra, Ghana.