A man has been shot dead by police in the Belgian city of Liege after apparently killing three people in what is believed to be a terrorist attack.

He was named by public broadcaster RTBF as a 36-year-old petty criminal who had been let out on day-release from a local prison on Monday. It said investigators were looking into whether he converted to Islam and had been radicalised in jail. 

According to public prosecutor Philippe Dulieu, he set upon two policewomen from behind with a knife before seizing one of their handguns and shooting them both dead. He then shot dead a 22-year-old man sitting in the passenger seat of a parked car.

He then went into a high school where he took a woman hostage. Armed police intervened and a gun battle broke out in which the attacker was killed. Several police officers were wounded.

Videos posted on social media showed police cars rushing to the scene of the attack with sirens blaring as people fled.

'The event is classed as a terrorist incident,' Dulieu said.

The national crisis centre, on high alert since past attacks by Islamic State in Paris and Brussels in the past three years, said it was monitoring events but had not raised its alert level.

La Libre Belgique newspaper quoted a police source as saying the gunman shouted 'Allahu Akbar' – God is greatest in Arabic.

Belgium's prime minister Charles Michel expressed his support for those caught up in the shooting, interior minister Jan Jambon said: 'Our thoughts are with the victims of this horrible act.'

King Philippe visited Liege, the biggest city in Belgium's French-speaking Wallonia region.

An industrial powerhouse on the Meuse river, it was the scene of a mass shooting in 2011, when a man killed four people and wounded over 100 others before turning his gun on himself.

A Brussels-based Islamic State cell was involved in attacks on Paris in 2015 that killed 130 people and on Brussels in 2016 in which 32 died. The Brussels IS cell had links to militants in Verviers, another industrial town close to Liege, where in early 2015 police raided a safe house and killed two men who had returned from fighting with radical Islamists in Syria.

European authorities are deeply concerned about the risks of petty criminals, including those not from Muslim backgrounds, being inspired to Islamist violence while incarcerated.

Additional reporting by Reuters.