As fighting started, 20 children escaped from the Lal Masjid, or Red Mosque, and were secured by Pakistan Rangers, a paramilitary organization.

Pakistani Information Minister Tariq Azim Khan said that there were 300 hostages inside the Red Mosque and the government hoped to get them out safely.

Tensions had been simmering for months between police and the students at the mosque, who are blamed for a string of recent kidnappings of civilians, Chinese nationals and Pakistani police.

Gunfire erupted moments after an announcement from the government's chief negotiator, Chaudhry Shujaat Hussain, that negotiations to end the standoff had failed.

Hussain said that Abdul Rashid Ghazi - the cleric leading the stand-off inside - said "no" to every offer from the government.

Tensions escalated on Sunday when Pakistani army commander Lieutenant Colonel Haroon-ul-Islam was shot and killed during an effort to free women and children inside the mosque by blasting holes in the perimeter walls. Three other officers were wounded.

More than 1,200 people, mainly students from the mosque's two Islamic schools, have already fled the compound, but officials don't know exactly how many remain. Ghazi has said there are 1,900 still in the compound. Meanwhile his brother, Maulana Abdul Aziz, said there are only about 850 inside. Other intelligence sources said that there are about 800 to 900.