At least 26 people, many of them foreigners, were killed in an attack overnight on a top hotel in the capital of Burkina Faso, the latest country to be drawn into a regional militant battle against the West and its allies.

A total of 126 people were freed, 33 of them wounded, from the four-star Splendid hotel after security forces retook the facility and nearby Cappuccino restaurant on Saturday over 12 hours after the attack began, Interior Minister Simon Compaore told AFP.

The assault on the two venues, popular with Westerners and UN personnel, was crushed by midday but the police and military were still combing the area for other suspects, a security source said.

Communications Minister Remi Dandjinou gave a provisional figure of 26 killed and announced three days of mourning. The French foreign ministry gave a figure of 27 dead "and around 150 injured".

Compaore said "three militants -- an Arab and two black Africans -- have been killed". The security source said four militants were killed, two of them women, and the victims were of 18 nationalities.

Al-Qaeda in the Islamic Maghreb (AQIM) claimed the attack on behalf of an affiliate, saying the strike on the former French colony was in "revenge against France and the disbelieving West", according to a statement carried by US-based monitoring group SITE.

AQIM said the gunmen were from the Al-Murabitoun group of notorious Algerian extremist Mokhtar Belmokhtar.

The attack will heighten concerns that militant groups are casting their net wider in search of targets in west Africa, two months after a siege at a luxury hotel in neighbouring Mali, where 20 people were killed, against mostly foreigners.

AQIM and Al-Murabitoun jointly claimed that attack.

President Roch Marc Christian Kabore, who took office just last month, a year after a popular uprising ousted longtime leader Blaise Compaore, called on his fellow citizens to show "courage".

Burkina Faso has "never caved in under any circumstances and it's not going to start now," he said.

The attack began around 7.45 pm when an unknown number of attackers stormed the 147-room hotel in the heart of Ouagadougou.

An AFP reporter saw three gunmen wearing turbans firing on Avenue Kwame Nkrumah, one of the city's main thoroughfares.

Another witness reported seeing four assailants.

The hotel and its environs were transformed into a battleground as Burkina Faso troops, backed by French forces based in the city under a regional counterterrorism initiative, launched an attempt to retake the hotel around 2 am.

The US, which has a small contingent in the country, said it supported French forces in the operation.

Several guests managed to escape from the hotel through side entrances, including Labour Minister Clement Sawadogo, who emerged unscathed.

"It was horrible, people were sleeping and there was blood everywhere. They were firing at people at close range," Yannick Sawadogo, one of those who escaped, told AFP.

"They were walking around people and firing at people who were not dead."

Compaore, the interior minister, told AFP that 10 bodies had been discovered on the terrace of the Cappuccino restaurant.

The foreign ministry in Paris confirmed a Frenchwoman was among the injured but said no French nationals had yet been confirmed among the victims.

French President Francois Hollande denounced the "odious and cowardly attack", with the European Union and Britain issuing similar condemnations.

Also on Saturday, Burkina's interior ministry reported that two foreigners were kidnapped Friday in the northern Baraboule region, near the border with Niger and Mali.

The ministry said the couple were Austrian, though the Austrian foreign ministry was unable to immediately confirm the report.

The army said a heavily-armed group of about 20 people also carried out an attack Friday near the border with Mali, killing two people -- a police officer and a civilian -- and leaving two others wounded.

The attack in Ouagadougou was unprecedented in Burkina Faso and comes as people were enjoying a return to stability after the election which ended a shaky transitional period following Compaore's ouster.

"The elections went off well...That makes the country a symbol of progress, which is what those people want to destroy," Cynthia Ohayon, a security analyst with the International Crisis Group said.

Al-Murabitoun had already begun to move into the impoverished country of around 17 million. In April last year, the group claimed the abduction of the Romanian security chief of a mine in the country's north.

Burkina Faso is one of the five countries in the restive Sahel region that is hosting France's Barkhane counter-terror mission.