A French priest has been killed in a hostage attack on a Catholic church in Normandy.

The priest, named as Father Jacques Hamel, had his throat slit by "two terrorists who claimed to be from Islamic State", said French President Francois Hollande. He was killed while celebrating mass in a Catholic church in the small town of Saint-Etienne-du-Rouvray, near Rouen.

One other was seriously wounded and is "fighting for their life", said the French interior ministry. 

The two assailants burst into the small church during morning mass and took five people hostage in the church in northern France. The hostages included two nuns and two worshippers as well as the priest, who was in his 80s.

The two hostage takers have been shot dead by police. French police confirmed they had "neutralised" the two men, who were armed with blades.

ISIS have claimed responsibility for the attack and said the assailants were "two soldiers of the Islamic State". One of the attackers was known to French intelligence and was on their terror watch list, according to local media. 

French TV channel M6 has reported one of the attackers had tried to travel to Syria and was arrested at the airport. He was imprisoned and later released with an electronic tag, according to M6. 

The French authorities have launched an anti-terror investigation and the anti-terror prosecutor will lead the examination.

A police spokesman said President Hollande and the interior minister Bernard Cazeneuve would support the Catholic community particularly targeted in the attack.

French Prime Minister Manual Valls expressed his "horror" at the "barbaric attack" on a church. "The whole of France and all Catholics are wounded. We will stand together," he wrote on Twitter. 

Pope Francis decried the "pain and horror of this absurd violence". A spokesman said the pontiff, who is currently in Poland for the Catholic World Youth Day celebrations, was "horrified". 

Pope Francis condemned the "absurd violence" and "all forms of hatred", said his spokesman Father Federico Lombardi. 

"We are particularly shocked because this horrible violence took place in a Church, in which God's love is announced, with the barbarous killing of a priest and the involvement of the faithful," he added. 

Former French President Nicholas Sarkozy said "the soul of France" had been affected by an attack on a Catholic priest.

The Archbishop of Canterbury, Justin Welby, tweeted that "evil attacks the weakest". 

The UK Prime Minister offered her condolences to the French people and described the attack as "sickening". She said: "Our thoughts and prayers are with them."

The attack is the latest in a string of deadly assaults in Europe. In France, the Normandy attack comes 12 days after a 31-year-old Tunisian killed 84 people in the French Riviera city of Nice when he ploughed his heavy goods truck into a crowd of revellers. Islamic State claimed responsibility for the attack in Nice.

Additional reporting by Reuters.