France gunman, a 26-year-old known for petty crimes, not considered Islamist threat: Minister
He then shot at four police officers who were jogging before taking hostages at the supermarket in Trebes, about 8 km to the east, where two people died.
The assailant, identified as 25-year-old Radouane Lakdim, killed three people and wounded five others in France's first major jihadist attack since October.
Ladkim was shot and killed by police.
Sixteen people were injured, two seriously, in what the President called an act of "Islamist terrorism", the BBC reported.
Collomb said the man had demanded the release of Salah Abdeslam - the prime surviving suspect in the Islamic State attacks that killed 130 people in Paris in 2015.
One person - believed to be Lakdim's partner - has been arrested in connection with the shootings.
Molins said that Lakdim first hijacked a auto in Carcassonne on Friday morning, killing the passenger and wounding the driver.
One person died in the carjacking, and two others were killed at the market, the French Interior Ministry said.
Few people were willing to talk to reporters, including a relative reached by telephone who quickly hung up.
The shoppers who hid themselves in the supermarket's cold store repeated a survival technique used when an Islamist attacker took hostages three years ago at a Jewish deli in Paris.
Trebes Mayor Eric Ménassi had earlier told another TV network, LCI, that the man had been screaming "Allahu Akbar, (God is greatest) I'll kill you all".
"I saw an open door for a refrigerated area and I told people to come to shelter there", she said.
"There were 10 of us, and we stayed an hour".
Speaking at the scene Interior Minister Gerard Collomb said police engaged the gunman soon after the start of the siege at around 11am.
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A lieutenant-colonel of the gendarmes who swapped himself in exchange for one of the hostages was fighting for his life in hospital, Macron said. Police raided the store after hearing gunshots.
It is not known whether it was the soldier who killed the gunman.
Collomb praised the officer for his "courage" and "act of heroism".
ISIS claimed responsibility for the bloody attack through its Aamaq news agency late Friday, announcing that Lakdim carried out the attack in response to the terrorist group's call for attacks in countries participating in the USA -led military coalition in Syria and Iraq.
French President Emmanuel Macron said security forces were securing the area.
The violence unfolded when the attacker stole a auto, killing one person in the vehicle and gravely wounding another, said Collomb, the interior minister.
What do we know about the suspect?
Prosecutor Francois Molins said he had been on an extremist watch-list due to "his radicalisation and his links with the Salafist movement", a hardline offshoot of Sunni Islam.
The Islamic State group claimed that the attacker - a 26-year-old known to French police for petty crime and drug dealing - was one of its "soldiers".
In the summer of 2014 Lakdim, who lived in Carcassonne, was put on a watchlist of people considered possible extremists.
Police were carrying out searches at Lakdim's family home.
What has the reaction been?
Islamic State's news agency Amaq claimed credit for the attack.
Abdeslam went on trial in Belgium in February over a separate incident and is not expected to face trial in France until at least 2020.
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