Police sources told AFP officers investigating three attacks in which a gunman killed three soldiers, three Jewish schoolchildren and a rabbi had sealed off an address in the Croix-Daurade district of Toulouse.
A source close to the inquiry told AFP the suspect had exchanged words with the RAID team and had declared himself to be a member of al Qaeda, the armed militant group founded by late Saudi extremist Osama bin Laden.
He is thought to be a 24-year-old man who had previously travelled to the lawless border area between Pakistan and Afghanistan which is known to house al Qaeda safehouses, one of the officials told AFP.
"He was in the DCRI's sights, as were others, after the first two attacks," an official said, referring to France's domestic intelligence service, adding: "Then the criminal investigation police brought in crucial evidence."
French Interior Minister Claude Gueant was at the scene of the operation, which was sealed off by officers in body armour and helmets. Two police were slightly wounded as the raid got underway, a source said.
If the suspect is proved to have been responsible for the killings, it would bring to an end to one of the most intense manhunts in French history and help calm tensions after a series of attacks disrupted a presidential election.
The shootings began on March 11, when a 30-year-old off-duty paratrooper of North African origin arranged to meet someone in Toulouse to sell him a scooter he had advertised online, revealing in the ad his military status.
The non-commissioned officer was shot in the head at close range with a .45 calibre pistol, a method that was to become the suspect's signature.
Four days later three more paratroopers from another regiment were gunned down in identical fashion in a street in the garrison town of Montauban, 45 kilometres (29 miles) alway. Two died, also French North Africans.
Then on Monday the shooter, still wearing a motorcycle helmet and riding a scooter, opened fire outside the Ozar Hatorah Jewish school in Toulouse, a religious studies teacher, his toddler sons and a seven-year-old girl.
Anti-terrorist magistrates said the same gun and and make of scooter was used in all three attacks and noted that the three attacks were carried out at precise four-day intervals.
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@Mandeep Vaid: The reason was the aggressive campaigns the ultra conservative candidate Marine Le Pen and the incumbent Nicolas Sarkozy have conducted. Their anti-Muslim rhetorics were thought to have triggered right-wing sentiments.
Many German, french TV senders, BBC and CNN have all the day reported live from Toulouse, where this terrorist is holed up in a flat. Every few minutes the following sentence is being repeated: Mohamed Mahar got his training in Pakistan from Al qaeda!
Looks like our tribal belt is the favourite tourist place for all the Al Qaeda Maniacs throughout the world....
Too bad the US didn't drone him while he was doing his terror training in Pakistan.
@zaid hamid: What a shame...
See... People are inspired by Pakistan. They are coming to Pakistan to learn. Pakistan rising.
All roads lead to Rome!