OTTAWA - A man armed with a rifle held several people hostage Wednesday at an office building in Edmonton, western Canada as police surrounded the premises and workers fled.

Dramatic television pictures showed hundreds of white collar workers streaming out of the Workers Compensation Office as police ringed the building and negotiated with the unidentified gunman.

"At 8:42 this morning, we received a call that a man with a rifle had walked into the Workers' Compensation building," Edmonton police spokesman Jeff Wuite told reporters.

"Our tactical officers and negotiators are currently speaking with the man in an attempt to bring this to a peaceful conclusion."

Public broadcaster CBC later reported that nine out of 11 hostages had been released, but seven hours after the hostage-taking began there was still no sign of an end to the stand-off.

A flood of workers, some in tears, streamed out as heavily-armed police surrounded the building and blocked off surrounding streets. Nearby buildings were locked down, but not evacuated.

Two robots typically used by the police bomb squad to dispose of explosives were also deployed. Witnesses told local media they had heard a loud noise believed to be an explosion but could not pinpoint its origins.

"We have no confirmation of shots being fired," said Wuite. Police herded some 700 displaced workers onto parked buses and set up positions behind parked cars and trees.

An acquaintance of the armed man at the centre of the hostage-taking told the Edmonton Journal that the is a former construction worker with a grudge against the Compensation Board.

Don Bellerose, who lives in the same assisted living facility as the hostage-taker, said the unidentified gunman had felt pressured to return to work early after a doctor damaged his knee ligaments during a routine examination.

Bellerose also said the man had grown increasingly agitated in the last month due to a custody dispute with his ex-wife.