Security forces ended a siege by al Qaeda fighters at a hotel in Burkina Faso's capital on Saturday, killing three Islamist gunmen and freeing 126 hostages, the West African nation's security minister said.

At least 20 people died and others were taken hostage when suspected Islamist gunmen stormed a hotel in the capital of Burkina Faso. Al Qaeda in the Islamic Maghreb (AQIM) has claimed responsibility.

Simon Compaore said operations were still under way at a second hotel nearby, the Hotel Yibi, and security forces were trying to determine if some of the fighters were hiding there.

"The operations at the Hotel Splendid and the (nearby) Restaurant Cappuccino have ended. 126 hostages were freed, among them 33 were wounded," the minister told Reuters. "Three jihadists were killed. They are an Arab and two black Africans."

Security forces began an assault to reclaim the Splendid Hotel in the early hours of Saturday and entered its lobby, part of which was on fire, said a Reuters witness, who later saw them enter the hotels upper floors amid bursts of gunfire.

The hotel is frequented by Westerners, which may have made it a target for the militants.

About 30 hostages including the labour minister were freed while around 33 people have been taken to hospital with injuries, said Minister of Communications Remis Dandjinou. No one has said publicly how many people might be in the hotel.

The Friday evening attack was the first time militants have assaulted the capital of Burkina Faso and comes as a setback to efforts by African governments, France and the United States to prevent attacks that have destabilised the region.

It follows a raid on a luxury hotel in Mali last November in which two attackers killed 20 people, including citizens of Russia, China and the United States. There have been many attacks by militants in other countries in West Africa in recent years and the vast majority of those killed have been Africans.

Robert Sangare, director of Ouagadougou's university hospital centre, said that among an initial 15 people brought to hospital some had bullet wounds while others had injuries from falls.

The doctor spoke to patients who had seen around 20 bodies, and one European woman being treated at the hospital said the attackers appeared to target Westerners, according to Sangare.

Burkina Faso's fire brigade saw around 10 bodies on the terrace of the Cappuccino cafe opposite the hotel, the Interior Minister told Reuters. It was not immediately clear how many people were in the hotel and restaurant when the attack began.

The hotel is sometimes used by French troops with Operation Barkhane, a force based in Chad and set up to combat Islamist militants across West Africa's vast, arid Sahel region. Burkinabe and French forces were working together to retake the hotel, the minister of communications said.

A U.S. defence official said France, the former colonial power, had requested U.S. intelligence surveillance and reconnaissance support in the city, and at least one U.S. military member in Burkina Faso was giving "advice and assistance" to French forces at the hotel.

France normally has up to 200 special forces troops in the country.

The assault began around 8.30 p.m. local time, and the attackers torched cars and fired in the air to drive people back from the building.

"We had just opened and there were a few customers we started to serve when we heard gunshots. ... There were three men shooting in the air," said Vital Nounayon, a waiter at a restaurant across the street from the hotel.

"Lots of people left their cars and motorcycles and ran. [Attackers] set fire to the vehicles. They also fired on the Cappuccino cafe across from the hotel before setting it on fire," he said, adding that the attackers wore turbans.

Medical personnel moved the wounded away from the front of the hotel and one civilian was shot dead as the assault began around midnight, a Reuters witness said.

Burkina Faso, a majority Muslim country, has undergone a democratic transition since October 2014 when longtime President Blaise Compaore was overthrown during mass protests.

Elite troops launched a failed coup last September, but the landlocked West African state has been largely spared violence by Islamist militants, unlike its neighbour Mali.

The attack presents a stiff test for President Roch Marc Kabore, who was elected in November as Burkina Faso's first new leader in decades.