The self-proclaimed al-Qaida militant died in an intense firefight as he tried to shoot his way out of his surrounded apartment in the southwestern city of Toulouse when officers from special police forces moved in.

An al-Qaida linked group, Jund al-Khilafah, claimed responsibility on jihadist websites for the shootings by a man whom French President Nicolas Sarkozy dubbed a "monster".

The seven killings shocked France, home to western Europe's largest Jewish and Muslim minorities, and raised questions about intolerance and security failures in the midst of a hard-fought presidential election campaign.

Mohamed Merah, who admitted shooting dead three soldiers and three children and a teacher at a Jewish school -- murders he filmed with a video camera -- opened fire when police from the elite RAID force stormed his flat.

Police said the 23-year-old burst out of the bathroom and shot at police before jumping out the window of his first-floor apartment, still firing as he fell, in a bid to escape.

France's chief anti-terror prosecutor, Francois Molins, said Merah was shot in the head while wearing a black djellaba, a traditional loose-fitting North African robe, and a bullet-proof vest.

Molins said police had been told to do everything possible to take Merah alive but had no choice when he opened fire "at an incredible rate".

"He literally launched an assault, rushing forward with a Colt .45 and continuing to fire as he jumped through the window, until he was shot in the head," Molins told journalists.

"He was dead by the time he hit the ground," a police source told AFP, while Interior Minister Claude Gueant said: "A RAID officer who is used to this kind of thing told me that he had never seen such a violent assault."

The streets of the residential area resounded with the sound of intense gunfire in a shattering finale to the standoff which began before dawn on Wednesday. A police source said around 300 shots were fired.

"It's the first time in my life I've seen someone, as we launch an assault, launch an assault against us," RAID head Amaury de Hauteclocque said.

Molins said five officers were wounded during the operation, including two during the initial pre-dawn raid on Wednesday, and three on Thursday, but that none of the injuries were life threatening.

He said police were searching for "any accomplices who may have convinced him to commit these acts or provided him with the means to commit them."

An autopsy was to be conducted on Merah's body at a specialist site in Toulouse, prosecutors said.

Sarkozy told a rally in Strasbourg as he got back on his re-election campaign trail that "these crimes were the work of a fanatic and a monster".

He vowed earlier in a televised address to crack down on extremism, saying he wanted legal action against people who regularly consult jihadist websites or travel abroad for indoctrination.

Molins said Merah had taken responsibility for the shootings, claiming to be avenging Palestinian deaths and opposing the French military's involvement in Afghanistan and France's ban on full-face veils.

And he said the militant had claimed to have been trained by al-Qaida in Waziristan, a tribal area of Pakistan known as a haven for Islamist insurgents connected to Taliban guerrillas.

Molins said he had gone to the region twice and on one occasion been arrested by Afghan police and handed over to US army troops, who put him on a flight back to France.

A US intelligence official told AFP that Merah was on America's "no-fly" list, which is put together by the US authorities and bans those on it from boarding flights to or from the country.

Officials in Afghanistan and Pakistan told AFP they could not immediately trace the gunman as having visited either country or having been held by US-led forces.

Jund al-Khilafah said in its statement that "the Frenchman carried out an operation that shook the foundations of the Zionist Crusaders."

"We claim responsibility for these operations," said the statement, adding that Israel's "crimes... will not go unpunished."

According to US monitoring group SITE, Jund al-Khilafah has previously claimed attacks in Afghanistan and Kazakhstan.

Police and prosecutors said earlier they had detained Merah's mother, brother and his brother's girlfriend as part of the inquiry. Sources said Merah had been known to the domestic security service for some years.

Molins confirmed Thursday that Merah had filmed the killings with a camera attached to a chest harness and that officers had viewed the footage.

During the first shooting of a paratrooper on March 11, he can be heard saying "You kill my brothers, now I'm killing you", as he fired two bullets into his victim, Molins said.

During the March 15 attack that killed two other paratroopers in nearby Montauban, he can be seen gunning down the soldiers before driving off on a scooter shouting "Allahu Akbar!" (God is Greatest!), Molins said.

On Monday the gunman, again wearing a motorcycle helmet and riding a scooter, attacked the Ozar Hatorah Jewish school in Toulouse, killing a religious studies teacher, his two toddler sons and a seven-year-old girl.

The siege interrupted the hard-fought campaign for France's April-May presidential vote, but Sarkozy's campaign team said he would be resuming his re-election bid with a rally in the city of Strasbourg on Thursday evening.

Socialist candidate Francois Hollande has been leading in polls to win a second-round runoff on May 6. But after initially trailing, Sarkozy has caught up and they are running neck-and-neck in the April 22 first round vote.

Late Thursday, Hollande said there had been a "failure" that allowed Merah to escape surveillance and he raised questions over the handling of his case. (AFP)