Army commandos on Saturday stormed a hideout of Islamist militants in Bangladesh's north-eastern Sylhet after nearly a 30-hour security siege failed to flush them out of a five-storey building.

Officials said army para-commandos led by a Major General and assisted by Special Weapons And Tactics (SWAT) unit, counter-terrorism unit and elite anti-crime Rapid Action Battalion launched 'Operation Twilight' after the standoff with militants who were holed up in the building.

Some 78 people could be evacuated and moved to safe place ahead of the full scale military assault. Several residents were believed to be still trapped inside the building occupied by the militants.

"GOC (General Officer Commanding) of our Sylhet-based 17 Infantry Division Major General Anwarul Momen is leading the 'Operation Twilight' there," a military spokesman told PTI as the crackdown was launched at 9 AM.

Counter-Terrorism and Transnational Crime (CTTC) chief Monirul Islam said they got information that JMB chief Musa along with some other JMB militants are in Sylhet.

On a tip off, police had raided the building at 2:00 AM on Friday and cordoned off the whole area after suspected militants detonated small bombs.

The neo-JMB, said to be inclined to the Islamic State, was behind the July 1 terror attack on a Dhaka cafe in which 22 people, including 17 foreigners, were killed.

"They (militants) were earlier thought to be staying only on the ground floor but now they are suspected to have taken position in three flats of the building," a newspaper said, quoting an unnamed official at the scene.

TV channels were barred from live broadcast of the operation but their footages showed commandos backed by the armoured personnel carriers taking positions around the building.

Witnesses and residents in the neighbourhood said they saw smoke billowing out from parts of the building and heard intermittent explosions and gunshots from inside the building.

Earlier reports said at least two suspected militants, including a female, were inside the Atia Villa's ground floor but a police officer later feared a "whole lot of them" could also be there, suspecting them as operatives of Neo-JMB.

Police used megaphones to ask the couple, who were living in the building for the last three months as tenants, to surrender, but they refused to give up.

The militants shouted "Allahu Akbar" (God is the greatest) and told police 'send your SWAT team'.

"Since last evening, they (militants) have stopped responding," an eyewitness said.

Military police put barricade on adjacent thoroughfares including a regional highway.

Authorities overnight cut off the gas and power lines of the building. Police asked people in the neighbourhood to keep safe distance from the hideout and advise to stay indoors.

The Operation Twilight was launched after a suicide bomber last night blew himself up near the international airport in Dhaka, an attack claimed by Islamic State terrorist group, a week after an identical attack on a RAB camp here.

Police tracked down the Sylhet hideout less than a week after they busted two militant dens on the outskirts of the south-eastern port city of Chittagong when four extremists were killed.

Bangladesh has been witnessing a spate of attacks on secular activists, foreigners and religious minorities since 2013. The country launched a massive crackdown on militants specially after the Dhaka cafe attack.