The suspect arrested in connection with the deadly attack on a French factory has been described by a work colleague as being mysterious and deceptively calm.

Father of three Yassin Salhi, 35, is the main focus of investigations after a man was decapitated and two people were hurt in an explosion at the site in Saint-Quentin-Fallavier in southeastern France.

Salhi caused the blast by ramming a delivery van into gas canisters and was arrested at the scene, Paris Prosecutor Francois Molins said.

The headless body of a 55-year-old man - who was Salhi's boss at a local transportation company - was found attached to the gates of the factory.

The severed head had Arabic writing scrawled across it and was placed next to two jihadi banners.

Mr Molins said Salhi was known to factory staff because he was a delivery driver who regularly visited the site.

While authorities had investigated Salhi for links to the radical Salafist movement, he was never identified as participating in terrorist activities and never convicted of a crime.

Co-worker Abdel Karim told RTL radio: "He was a wolf in sheep's clothing.

"He had already talked to me about Daesh (one of the names for the Islamic State group)."

He added that it was "not to indoctrinate me into anything, but simply to ask me my opinion. When I told him what I thought, from that day on, it was 'hello/goodbye'".

Radicalisation

Salhi had caught the attention of intelligence authorities because he was reportedly mixing with a group of people associated with Salafism, an ultra-conservative interpretation of Islam.

France's Interior Minister Bernard Cazeneuve said: "He was investigated in 2006 for radicalisation, but (the probe) was not renewed in 2008. He had no criminal record.

"This individual has links with the Salafist movement, but had not been identified as having participated in activities of a terrorist nature."

Saleh's wife - who has also been detained, along with his sister and another unidentified person - called French radio station Europe 1 to say she was shocked by his alleged actions.

"On the news they are saying that it's a terrorist attack, but that's impossible. I know him, he's my husband. We have a normal family life," she said before her arrest.

She said her husband went to work as a delivery driver at 7am and that she expected him home in the afternoon.

"My sister-in-law called up and said switch the telly on and look at the news. She was crying. My heart stopped. I couldn't understand it," she said.

"We are normal Muslims. It is Ramadan. We have three kids and a normal family life."

According to reports, Saleh's father died when he was a teenager, prompting his mother to sell the family home and move away.

Nacer Benyahia, the imam of a mosque in Pontarlier which Salhi attended as a boy, described Salhi as "a calm kid", adding: "It was a pleasure to have him at the mosque... He was nice."

But he said Salhi "was alone" and could have been "the ideal target" for "radicals looking for prey".

Authorities know Salhi lived for a time with his wife and three young children in the eastern city of Besancon.

Towards the end of 2014, Salhi moved his family into a low-income apartment building in Saint-Priest, a quiet suburb of Lyon.

French President Francois Hollande said the security level in the region of Rhone-Alpes has been raised to "attack" for the next three days.

"The attack was of a terrorist nature since a body was discovered, decapitated and with inscriptions," Mr Hollande told a news conference in Brussels.

He added that a considerable police force had been deployed in the region and other industrial sites protected to avoid any further incidents.