A priest has died from a slashed throat after two knifemen burst into a church as he celebrated mass, in what appears to be the latest in a string of terror attacks in France.

Two men, believed to be the assailants, held members of the congregation hostage for an hour before being shot dead by police after emerging on to the courtyard of the church in Normandy, according to local reports.

French newspapers suggested that the dead man was 92 years old and had served the community of Saint-Etienne-du-Rouvray, south of Rouen, for decades.

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Police sources were quoted as saying that at least one of the two hostage-takers was bearded and was wearing a skullcap of the kind worn by some Muslims.

French president Francois Hollande and interior minister Bernard Cazeneuve are on their way to the scene.

The French government said one hostage was killed and another seriously injured.

One member of the congregation - made up of two nuns and two worshippers - was said to be seriously injured.

The hostage-takers entered the church armed with knives shortly before 10am local time (9am UK time), said French media sources.

As the situation developed, officers from the elite anti-terrorist Raid squad were called in to assist local police.

A number of shots were heard over a period of around 15 seconds as the incident came to an end around 40 minutes later.

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Anti-terrorist authorities in Paris have opened an inquiry into the hostage-taking.

Eulalie Garcia, who works in a beauty parlour, is on the same road as the church, and told reporters that she knew the 92-year-old priest, who had taught her the catechism as a young girl.

"My family has lived here for 35 years and we have always known him," she said. "He was someone who was treasured by the community. He was very discreet and didn't like to draw attention to himself."

She said she was very shocked by the death of the priest, who lived opposite his church. "It can happen to anyone," she said.

The area around the church remained cordoned off and the old town was out of bounds.