Their claims have not been confirmed, but local authorities say over 20 captives are inside the natural gas complex that the militants seized near the Libyan border.
In what could be the first spillover from France's intervention in Mali, Islamist militants attacked and occupied a natural gas complex partly operated by energy company BP in southern Algeria on Wednesday. Two foreigners were killed and dozens of others, including Americans, were taken hostage.
A militant group claimed responsibility for the attack, saying it was in revenge for Algeria's support of France's operation against al-Qaida-linked Malian rebels groups far to the southeast. It said it was holding 41 foreigners, including seven Americans.
Algerian forces have surrounded the complex and the state news agency reported a bit more than 20 people were being held, including Americans, Britons, Norwegians, French, and Japanese, citing the local authorities.
"Algeria will not respond to terrorist demands and rejects all negotiations," Interior Minister Daho Ould Kablia said on television. He denied that the militants were from Mali or Libya, possibly suggesting they were from Algeria itself.
In a statement, BP said the site was "attacked and occupied by a group of unidentified armed people," and some of its personnel are believed to be "held by the occupiers."
The number and identities of the hostages were still unclear, but Ireland announced that a married Irish man was among them, while Japan and Britain said their citizens were involved as well. A Norwegian woman said her husband called her saying he had been taken hostage.
US State Department spokeswoman Victoria Nuland said that according to their information "US citizens were among the hostages."
In addition to those killed — one of them a Briton — six were wounded in the attack, including two foreigners, two police officers and two security agents, the state news agency reported.
Hundreds of Algerians work at the plant and were taken in the attack, but the state news agency reported that they have gradually been released in small groups, unharmed by the late afternoon.
A group called the Katibat Moulathamine, or the Masked Brigade, called a Mauritanian news outlet to say one of its affiliates had carried out the operation on the Ain Amenas gas field, taking 41 hostages from nine or 10 different nationalities, including the seven Americans.
The group's claim could not be independently substantiated and the US embassy said it wasn't "aware of any US citizen casualties."
The caller to the Nouakchott Information Agency, which often carries announcements from extremist groups, did not give any further details, except to say that the kidnapping was carried out by "Those Who Signed in Blood," a group created to attack the countries participating in the offensive against Islamist groups in Mali.
The Masked Brigade was formed by al-Qaida's longtime strongman in the Sahara region, Moktar Belmoktar, a one-eyed Algerian who recently declared he was leaving the terror network's Algerian branch, Al-Qaida in the Islamic Maghreb for his own group.
He said at the time he would still maintain ties with the central organization based out of Afghanistan and Pakistan.
French President Francois Hollande launched the surprise operation in its former West African colony on Friday, with hopes of stopping al-Qaida-linked and other Islamist extremists he believes pose a danger to the world.
Wednesday's attack began with the ambush of a bus carrying employees from the gas plant to the nearby airport but the attackers were driven off, according to the Algerian government, which said three vehicles of heavily armed men were involved.
"After their failed attempt, the terrorist group headed to the complex's living quarters and took a number of workers with foreign nationalities hostage," said the statement.
Attacks on oil-rich Algeria's hydrocarbon facilities are very rare, despite decades of fighting an Islamist insurgency, mostly in the north of the country.
In the last several years, however, al-Qaida's influence in the poorly patrolled desert wastes of southern Algeria and northern Mali and Niger has grown and it operates smuggling and kidnapping networks throughout the area. Militant groups that seized control of northern Mali already hold seven French hostages as well as four Algerian diplomats.
The natural gas field where the attack occurred, however, is more than 600 miles from the Mali border, though it is just 60 miles from Libya's deserts.
BP, together with Norwegian company Statoil and the Algerian state oil company, Sonatrach, operate the gas field. A Japanese company, JGC Corp, provides services for the facility as well.
Prime Minister David Cameron's office said "several British nationals" are involved in the "ongoing incident," without giving an exact number.
Japanese Chief Cabinet Secretary Yoshihide Suga said the kidnapped foreigners possibly include Japanese employees of JGC.
"We are certain that JGC is the one affected," Mr. Suga said, adding that the government is now negotiating with local officials through diplomatic channels, asking to protect the lives of the Japanese nationals.
Japanese news agencies, citing unnamed government officials have said there are three Japanese hostages.