Paris police have launched a terror investigation after one person died and four others were injured by a man the Islamic State claims is one of its "soldiers".
Police shot the attacker dead while he was on the ground suffering from cardiac arrest, according to BFMTV.
The knife attack happened just before 9.00pm on Saturday evening in Rue Monsigny in the French capital's second arrondissement where Paris's Opera and landmark shops are located.
The attacker shouted "Allahu Akbar" - God is great in Arabic - according to witnesses, the Paris prosecutor Francois Molins said.
A police source said he also shouted: "Kill me or I kill you."
Two hours after the attack French authorities announced they were launching a terrorism investigation.
Moments later, the IS news agency Amaq claimed the suspect was one of its "soldiers" who carried out the attack in response to the terror group's calls for supporters to target members of the US-led military coalition fighting the extremists in Iraq and Syria.
France's military has been active in the coalition since 2014.
French President Emmanuel Macron said France has "once again paid the price of blood".
He tweeted: "All my thoughts go to the victims and the wounded of the knife attack perpetrated tonight in Paris, as well as to their relatives.
"I salute on behalf of all the French the courage of the policemen who have neutralised the terrorist.
"France once again paid the price of blood but did not give an inch to the enemies of freedom."
La France paye une nouvelle fois le prix du sang mais ne cède pas un pouce aux ennemis de la liberté (2/2).
— Emmanuel Macron (@EmmanuelMacron) May 12, 2018
Paris police tweeted: "An attack on five people in the 2nd arrondissement of Paris by an individual armed with a knife: One victim has died, two are seriously wounded and two are injured slightly. The assailant is dead."
The person who was fatally stabbed is believed to be a 29-year-old man, while the two seriously injured are said to be a man and a woman.
Video on social media showed people fleeing the area, which was near St Augustine Street and is lined with restaurants.
A witness who was sitting in a Japanese restaurant with his girlfriend told Le Parisien: "Just before 9.00pm, we saw people rushing inside the restaurant screaming that a man was outside with a bloody knife.
"People were throwing themselves on the floor in panic.
"Five minutes later there was a second scare and customers blocked the door of the restaurant for fear the attacker had slipped inside.
"Then it calmed down. Outside, even the police seemed a bit lost at first."
Milan (19) said he saw "several people in distress" including a woman with wounds to her neck and leg.
"Firemen were giving her first aid. I heard two, three shots and a policeman told me that the man had been overpowered," he said.
French Interior Minister Gerard Collomb tweeted: "Aggression to #Paris: I salute the cool composure and responsiveness of the police forces that have neutralised the assailant.
"My first thoughts go to the victims of this heinous act."
Agression à #Paris : je salue le sang froid et la réactivité des forces de police qui ont neutralisé l’assaillant.
Mes premières pensées vont aux victimes de cet acte odieux.
— Gérard Collomb (@gerardcollomb) May 12, 2018
Anne Hidalgo, the Mayor of Paris, said: "Tonight our city was bruised. My first thoughts are with the family of the victim who lost their life.
"I am so thinking about the wounded and their loves ones. I want to tell them that all Parisiens are at their side."
Government spokesman Benjamin Griveaux tweeted: "Thoughts for the victims of the attack that hit the heart of Paris tonight.
"My gratitude to the police force who neutralised the assailant. In the face of the threat, we must remain vigilant and united."
France is on alert after a string of jihadist attacks has claimed the lives of more than 245 people, including 90 at the Bataclan concert hall in November 2015.