Al-Shabab — the Somalia-based extremist group that carried out the 2013 Westgate Mall attack in Nairobi that left 67 people dead — claimed responsibility and said its members were still fighting inside.
"It is terrible. What I have seen is terrible. I have seen a human as I ran out and there is what looks like minced meat all over," said a man who ran from the scene, Charles Njenga.
It was not clear how many attackers took part, but the bloodshed appeared to fit the pattern of attacks al-Shabbab often carries out in Somalia's capital, with an explosion followed by a group of gunmen storming the place.
Several vehicles burned, and people were rushed, some carried, from the scene. At least one was on a stretcher. Some ducked behind cars, screaming. Others appeared to take cover behind fountains and other features at the lush complex, which includes the DusitD2 hotel, along with bars, restaurants, banks and offices.
Kenya's national police chief, Joseph Boinnet, said it appeared to be a terror attack.
"We are aware that armed criminals are holing up in the hotel, and special forces are now currently flushing them out," Boinnet said. He did not confirm any deaths and or say how many were wounded.
A witness, Robert Murire, said he saw at least two bodies at the scene, along with attackers wearing green and wrapped in ammunition.
The attack came a day after a magistrate ruled that three men must stand trial on charges they were involved in the Westgate Mall siege. A fourth suspect was freed for lack of evidence.
Gunfire continued several minutes after the first reports as ambulances, security forces and firefighters converged on the scene. A bomb disposal unit arrived, and vehicles were cordoned off for fear they contained explosives.
Police said they blew up a car that had explosives inside. An unexploded grenade was also seen in a hallway at the complex.
Security forces hurried out a large group of women, one of them still in curlers. Dozens of others were rushed to safety as plainclothes officers went shop to shop in the complex. Some people held up their hands to show they were unarmed.
Al-Shabab has vowed retribution against Kenya for sending troops to Somalia since 2011. The al-Qaida-linked group has killed hundreds of people in Kenya, which has been targeted more than any other of the six countries providing troops to an African Union force in Somalia.
The attack immediately reminded many Kenyans of the Westgate Mall attack, when al-Shabab extremists burst into the luxury shopping center, hurling grenades and starting a days-long siege.
The hotel complex in Nairobi's Westlands neighborhood is less than 2 kilometers from Westgate Mall and lies on a relatively quiet, tree-lined road in what is considered one of the most secure areas of the city. The hotel's website says it is "cocooned away from the hustle and bustle in a secure and peaceful haven."
The attack came three years to the day after al-Shabab extremists attacked a Kenyan military base in Somalia, killing scores of people.