The hostages have now been freed and the suspect arrested, the French interior minister announced.
The hostage-taker reportedly entered the building in Rue des Petites Ecuries, pretending to be a food-delivery courier, at around 4pm local time.
A spokesman for France's BRI intervention brigade said negotiations with the man were underway.
An armed police officer and a sniffer dog search the area.
Authorities said that officers from a specialist unit were responding to an "unstable person" who was holding two people but that there was no indication the incident was terrorism-related.
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Gerard Collomb tweeted the news ending Tuesday's drama in a ground-floor office in a crowded neighborhood of the French capital.
Using anti-explosive robots up and down the street, police surrounded the area to prevent the hostage taker from escaping, CNN reported.
The male suspect reportedly asked to speak with the ambassador of Iran, Lefebvre said.
One of the hostages is reportedly a pregnant woman, and another is "severely injured", according to a witness. The attacker, who appeared to be brandishing a fake weapon, had doused his remaining two hostages in petrol, the source said.