Police said witnesses heard the attackers shout "we have avenged the prophet" and "Allahu Akbar". President Francois Hollande immediately rushed to the scene of what he called "an act of exceptional barbarism." Amateur video shot after the bloodbath showed two men masked and dressed head-to-toe in black military style outfits leaving the building, then shooting a wounded policeman in cold blood as he lay on the pavement.
The gunmen, who appear to be calm, then returned to a black Citroen and drove off.
Large numbers of police and ambulances rushed to the scene, where shocked residents spilled into the streets. Reporters saw bullet-riddled windows and people being carried out on stretchers.
The gunmen remained at large by early evening and there was no claim of responsibility. The interior minister said three assailants took part. Two police were confirmed among the dead and four people were critically injured. The capital was immediately placed under the highest alert status.
The attack took place at a time of heightened fears in France and other European capitals over fallout from the wars in Iraq and Syria, where hundreds of European citizens have gone to fight alongside the radical Islamic State group.
In a sign of such tensions, a media group's office in Madrid was evacuated later in the day after a suspicious package was sent there.
'These guys were serious'
One man, who witnessed the attack, described a scene like "in a movie."
"I saw them leaving and shooting. They were wearing masks. These guys were serious," said the man who declined to give his name. "At first I thought it was special forces chasing drug traffickers or something."
An employee at a nearby daycare center said he was walking with children when panic erupted.
"People leaned out of the window and yelled at me to get off the pavement," he said.
"We got out of there very fast," said Jean-Paul Chevalier, 56. "People were panicking. I heard shooting."
Hollande called for "national unity", adding that "several terrorist attacks had been foiled in recent weeks".
US President Barack Obama condemned the attack and pledged assistance, while British Prime Minister David Cameron called it "sickening."
German Chancellor Angela Merkel said the attack was "despicable" and Russian President Vladimir Putin condemned the violence along with the Arab League.