A gunman suspected of killing seven people in the name of al Qaeda, including three children at a Jewish school, said on Wednesday he would hand himself over to police to end an hours-long siege in southwestern France.

About 300 police, some in bullet-proof body armor, cordoned off an area surrounding a four-storey house in a leafy suburb of the city of Toulouse where the 24-year-old Muslim man, identified as Mohamed Merah, was holed up on the ground floor.

Interior Minister Claude Gueant said the gunman was a French citizen of Algerian origin who had been to Pakistan and Afghanistan and had carried out his killings in revenge for French military involvement abroad.

President Nicolas Sarkozy, running for re-election in five weeks time, said France should not give way to discrimination or vengeance after the shootings of a rabbi and the three children, and three soldiers of North African origin.

His warning came after far-right leader Marine Le Pen, a rival presidential candidate, said France should wage war on Islamic fundamentalism.

"I have brought the Jewish and Muslim communities together to show that terrorism will not manage to break our nation's feeling of community," Sarkozy said after meeting community leaders. "We must stand together. We must not cede to discrimination or vengeance."

Interior Minister Gueant said Merah, who had been under surveillance since the attack on the first of the soldiers last week, wanted revenge "for the Palestinian children and he also wanted to attack the French army because of its foreign intervention".

He told journalists Merah was a member of an ideological Islamic group in France but this organization was not involved in plotting any violence.

"We are certain that the man surrounded by police, and whose surrender is expected, is the one who committed this series of killings," Gueant told BFM television.

He said Merah had thrown a Colt 45 pistol out of a window of the block of flats in exchange for a ‘communication device’ or mobile phone, but was still armed. Police evacuated the other residents at 11:00 a.m (6 a.m. EDT).

"He said ... he will turn himself in this afternoon."

Police sources said they had conducted a controlled explosion of the suspect's car at around 9:00 a.m. after discovering it was loaded with weapons.

Merah's girlfriend and brother, who was also known to authorities as a radical Islamist, have also been arrested, officials said.

Raid

Gueant said Merah had contacted the first soldier he attacked under the pretext of wanting to buy his motorcycle.

Investigators identified the IP address he used - that of his mother - because he was already under surveillance for radical Islamist beliefs.

"We knew, and that is why he was under surveillance, that he had travelled to Afghanistan and Pakistan," the minister said.

The telephone of the man and his family was tapped from Monday and with the help of other information the police decided to raid his house. Merah has a criminal record in France, Gueant said, but nothing indicating such an attack was possible.

Sarkozy had been informed of the standoff early in the morning, officials said.

The president's handling of the crisis could be a decisive factor in determining how the French people vote in the two-round presidential elections in April and May.

In Jerusalem, the Jewish victims from the Ozar Hatorah school were buried. Parliament speaker Reuben Rivlin said in his eulogy at the hill-top cemetery that the attack was inspired by ‘wild animals with hatred in their hearts’.

Immigrants and Islam have been major themes of the campaign after Sarkozy tried to win over the voters of Le Pen, who quickly called for a war on fundamentalism.

"The risk of fundamentalism has been underestimated in our country. Certain political and religious groups are developing in the face of a certain laxness," she told the i-Tele news channel, questioning the decision to deploy in Afghanistan.

"We must now wage this war against these fundamentalist political and religious group that are killing our children, that are killing our Christian children, our Christian young men, young Muslim men and Jewish children."

But leaders of the Jewish and Muslim communities pointed out that the gunman was a lone extremist.

Dalil Boubakeur at the main mosque in Paris told Europe 1 radio that no one should link the Toulouse events and the Muslim religion, which is "99 per cent peaceful, responsible, non-violent and well-integrated into the country".

France's military presence in Afghanistan has divided the two main candidates in the election. Socialist frontrunner Francois Hollande has said he will pull them out by the end of this year while Sarkozy aims for the end of 2013.

Jean Marc, a 56-year-old restaurant owner in the city who declined to give his last name, said he believed the crisis would benefit the far right or Sarkozy in the election.

"The Socialists don't talk about this stuff and it shows they don't know what they are doing," he said. "They (the police) need to get this guy."

Paris Prosecutor Francois Molins said on Tuesday that the gunman had filmed the killings in the school. He first wounded Rabbi Jonathan Sandler as he entered the school and then cornered eight-year-old Myriam Monsonego and shot her in the head, he said. He then returned outside and shot Sandler and his two children, who had rushed to his side, at point blank range.

Authorities believe that the gunman in the school shooting was the same person responsible for killing the seven people because the same Colt 45 handgun was used in all the attacks and in each case the gunman arrived on a Yamaha scooter with his face hidden by a motorcycle helmet.