One or more people opened fire on Belgian and French police officers when they went to conduct what they had expected to be a routine search of an apartment in a suburban side street in the south of the Belgian capital on Tuesday.
Some of those involved in the November 13 Paris bombings and shootings lived or were based in the city.
Three officers, including a French policewoman, were wounded and a fourth was hurt during a subsequent exchange of fire.
When police stormed the building three hours after the first raid, they killed an unidentified individual wielding a Kalashnikov, a gun used by some of the Islamic State militants in Paris.
Prime Minister Charles Michel and members of his government told a news conference that police operations were continuing.
Police searched more nearby buildings late in the evening in the southern Brussels borough of Forest but did not confirm Belgian media reports that they were hunting two further suspects.
“We have escaped a tragedy,” Michel said, noting that none of the four wounded police officers was seriously hurt.
Ministers said the presence of French police at the scene was a “coincidence”, not an indication that the initial search had been expected to provide a major break in the case.
The shooting prompted a lockdown in a wide area around the house in the rue du Dries that lasted for hours until police began escorting children from schools and kindergartens after dark, and about 50 who had taken shelter in a supermarket.
Residents were allowed to return to homes behind the cordon.
Around 5pm, Reuters journalists heard gunshots as police commandos crowded into the street where the raid unfolded. DH newspaper said a suspect was shot dead after being spotted from a police helicopter in a nearby garden.
Investigators believe much of the planning and preparation for the November bombing and shooting rampage in Paris was conducted in Brussels by young French and Belgian nationals, some of whom fought in Syria for Islamic State.
The attack strained relations between Brussels and Paris, with French officials suggesting Belgium was lax in monitoring the activities of hundreds of militants returned from Syria.
Belgian security forces have been actively hunting suspects and associates of the militants involved in the Paris attacks.
One of the prime suspects, 26-year-old Brussels-based Frenchman Salah Abdeslam, is still on the run. He left Paris hours after his brother blew himself up outside a cafe.
Belgian authorities are holding 10 people who have been arrested in the months since the attacks, mostly for helping Abdeslam.
Belgian public television quoted French police sources as saying Abdeslam had not been the target of Tuesday’s raid.
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