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Police hunting a gunman suspected of killing seven people in southern France are laying siege to a flat in Toulouse.

The man, named as Mohammed Merah, 23, a Frenchman of Algerian origin, has said he belongs to al-Qaeda and acted to "avenge Palestinian children".

Police are negotiating with the man, who is still said to be armed but says he may give himself up this afternoon.

French Interior Minister Claude Gueant said the man had been tracked by French intelligence for "several years".

The brother of the suspect has been arrested in another part of Toulouse, with several other relatives also reported detained.

French President Nicolas Sarkozy has made a televised address, paying tribute to the security forces who are carrying out the operation and saying that terrorism "will never be able to fracture our national community".

Mr Gueant, who is at the siege scene, says the suspect has a Kalashnikov, a mini-Uzi 9mm machine pistol and several handguns. He earlier threw one gun, a Colt 45, from a window in exchange for a phone. A .45 calibre pistol was used at all three murder scenes. More weapons were found in a car near the flat.

Mr Gueant said the suspect had no particular demands and that, after initially talking to the authorities, Merah broke off discussions. Negotiations have now resumed, Agence France-Presse reports.

Surrounding buildings have been evacuated.

The suspect's mother, who is Algerian, had been brought to the scene, but Mr Gueant said she had refused to become involved as "she had little influence on him".

The man shot at the door after police arrived, Mr Gueant said, injuring one officer in the knee and "lightly injuring" another.

The minister said: "Our main concern is to catch him and to catch him under such conditions that he can be brought to justice."

The flat in Toulouse is in a five-storey building and Merah is on the ground or first floor, correspondents say.

Police wearing helmets and flak jackets have cordoned off the area. Prosecutors say other operations are under way to track down possible accomplices.

Mr Gueant said the suspect had made one visit to Afghanistan and one to Pakistan.

"He claims to be a mujahideen and to belong to al-Qaeda," Mr Gueant said.

"He wanted revenge for the Palestinian children and he also wanted to take revenge on the French army because of its foreign interventions."

French media have linked Merah to a group called Forsane Alizza (Knights of Pride) that was banned by Mr Gueant in January.

The prison director in Kandahar, southern Afghanistan, Gulam Farooq, told the ³ÉÈËÂÛ̳ that Merah was arrested in 2007 and jailed for three years for planting bombs, before escaping in a mass Taliban-led break-out in 2008.

The ³ÉÈËÂÛ̳'s Hugh Schofield in Paris says investigators report that Merah was identified because of an email message sent to his first victim about buying a scooter.

The message, sent from the suspect's brother's account, set up an appointment at which the soldier was killed, sources told AFP.

The man had also sought out a garage in Toulouse to have his Yamaha scooter repainted after the first two attacks. A scooter was used in all the attacks.

An editor of the France 24 network said a man had called it overnight saying he was responsible for the shootings and that he wanted to published on the internet films he had made of all of the killings.

Although there is no confirmation it was Merah, France 24 said he had made the same comments as later reported by Mr Gueant, gave the same age and recounted very specific details of the killings.

Merah's lawyer said his client was in court two weeks ago for driving without a licence and was "courteous and civilised".

A huge manhunt had been launched after Monday's shooting at a Jewish school that left four people dead, and the killing of three soldiers in two incidents last week.

The funerals of the rabbi and three children killed on Monday have been held in Jerusalem.

At least 2,000 mourners gathered at the Givat Shaul cemetery on the western outskirts of Jerusalem.

The attacker gunned down Jonathan Sandler, a 30-year-old rabbi and teacher of religion, his two young sons Arieh and Gabriel and then - at point blank range - the head teacher's daughter, seven-year-old Myriam Monsonego, in Monday's attack at the Jewish school.

French Foreign Minister Alain Juppe has accompanied the relatives of the dead to the funerals in Jerusalem.

In his eulogy to clearly distraught relatives at the service, Israeli speaker of parliament Reuben Rivlin said: "The entire house of Israel weeps over these murders."

In his televised address, Mr Sarkozy said that he had had a meeting with Jewish and Muslim leaders.

"I told them and I tell the nation that we should be united. We cannot give in to discrimination or vengeance. We owe this to the victims who have been killed in cold blood and to our country."

Mr Sarkozy will later attend a memorial service for the three soldiers killed in the two attacks last week.

All three were of North African descent. Another soldier from the French overseas region of Guadeloupe was left critically injured.

Socialist presidential candidate Francois Hollande and Marine Le Pen, the leader of the far-right Front National, will attend the memorial service in Montauban.

After Wednesday's raid took place, Ms Le Pen said the "fundamentalist threat has been underestimated" in France.