The Islamic State have claimed responsibility for the attack on a cafe in the capital Dhaka, the Associated Press reports.
The group said it targeted foreigners in the attack, reports say.
BREAKING: Islamic State group claims attack in Bangladesh, says it targeted foreigners.
Bangladesh will stand up and fight the "terror threat" that has mushroomed in its backyard, the country's prime minister has said.
In a live television broadcast, Sheikh Hasina said the country stood "committed and determined" to uphold its freedom, and announced two days of national mourning in the wake of a deadly Islamist militant attack on an upmarket restaurant in Bangladesh's capital Dhaka.
Seven Japanese are among the dead in the Bangladesh cafe siege.
Japanese Chief Cabinet Secretary YoshihideSuga confirmed that five men and two women had been killed.
Nine Italians were among 20 foreign nationals killed in Friday's attack by suspected Islamist militants at a cafe in Bangladesh, Italy's foreign minister has said.
Security forces stormed the restaurant in Dhaka and ended a 12-hour standoff on Saturday, killing six gunmen.
"We have identified nine (Italians) killed, there is another person who is missing and could be hiding himself or could be among wounded people ... we are looking for him," Foreign Minister Paolo Gentiloni told reporters.
Italian Prime Minister Matteo Renzi has condemned the attack on a Dhaka cafe as he confirmed that Italians had been killed.
Renzi said he would not disclose any more details until families of the dead are notified.
All 20 hostages killed in Dhaka cafe siege were foreign, the Bangladesh army has said.
Condemning the deadly attack by suspected Islamist militants, Bangladesh's Prime Minister Sheikh Hasina said:
It was an extremely heinous act.
Anyone who believes in religion cannot do such act.
They do not have any religion, their only religion is terrorism.
Twenty people have been killed in attack on Dhaka cafe, a Bangladeshi army official has said.
Six attackers were also killed.
At least 13 people have been rescued following the raid, according to a Bangladeshi official.Read the full story ›
Seven Italian nationals are thought to be among the hostages held by gunmen in a popular restaurant in the diplomatic quarter of Dhaka, the Bangladeshi capital, according to Italian media.
State TV RAI quoted Mario Palma, the Italian ambassador in Dhaka, as saying the seven Italians were businessmen.
One Italian hostage had escaped, an Italian foreign ministry source said.
Italian media said the escaped man told police there were seven Italians still inside the restaurant.