The teenager, carrying at least one sword, initially took 20 children hostage at the kindergarten in Besancon at 9am (8am GMT) but released most of them about an hour later, officials said.
"Around 14 children have come out and at the moment there are five or six still inside," Besancon's mayor, Jean-Louis Fousseret, told France Info radio.
The children being held are aged between four and five. Their teacher and a classroom assistant are also being held. An official with city hall said they were in the Charles Fourier pre-school. Mayor's aide Jean-Marc Magda said on BFM-TV that the children's families were being offered psychological and medical assistance.
French Children Held Hostage
The hostage-taker has been in contact with police negotiators since the beginning of the siege but the motivation for his actions is unknown.
An elite police unit has been sent from Strasbourg to deal with the incident.
Local police said it was possible more children were being released but they did not have any more information.
The school is in Planoise, a neighbourhood of housing estates with a big immigrant population on the western edge of Besancon.
Other classrooms in the building have been evacuated. The education minister, Luc Chatel, is reportedly on his way to the school.
French Children Held Hostage
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