SAINT DENIS, France - A woman suicide bomber blew herself up in a police raid that sources said had foiled a jihadi plan to hit Paris's business district, days after attacks that killed 129 across the French capital.

Police stormed an apartment in the Paris suburb of St. Denis in a hunt for Abdelhamid Abaaoud, a Belgian Islamist militant accused of masterminding the bombings and shootings, but more than 15 hours later it was still unclear if they had found him.

Heavily armed officers entered the building before dawn, triggering a massive firefight and multiple explosions. Eight people were arrested and forensic scientists were working to confirm if two or three militants died in the violence.

"A new team of terrorists has been neutralised," Paris Prosecutor Francois Molins told reporters, saying police had fired 5,000 rounds of munitions into the apartment, which was left shredded by the assault, its windows blown out and the facade riddled with bullet impacts.

"This commando could have become operational," Molins said.

A source close to the investigation said the dead woman might have been Abaaoud's cousin, while the Washington Post quoted senior intelligence officials as saying Abaaoud himself had died in the shoot out.

Molins said none of the bodies had been identified, adding only that Abaaoud was not amongst those detained.

Police were led to the apartment following a tip off that the 28-year-old Belgian, previously thought to have orchestrated the Nov. 13 attacks from Syria, was actually in France.

Investigators believe the attacks -- the worst atrocity in France since World War Two -- were set in motion in Syria, with Islamist cells in neighbouring Belgium organising the mayhem.

Local residents spoke of their fear and panic as the shooting started in St. Denis just before 4.30 a.m. (0330 GMT).

"We could see bullets flying and laser beams out of the window. There were explosions. You could feel the whole building shake," said Sabrine, a downstairs neighbour from the apartment that was raided.

She told Europe 1 radio that she heard the people above her talking to each other, running around and reloading their guns.

Another local, Sanoko Abdulai, said that as the operation gathered pace, a young woman detonated an explosion.

"She had a bomb, that's for sure. The police didn't kill her, she blew herself up...," he told Reuters, without giving details. Five police officers and a passerby were injured in the assault. A police dog was also killed.