Car burst into flames moments after the terrorist rammed a police van on the Champs-Élysées in Paris

An armed driver who slammed a car into a police van has been shot dead, authorities in France said.

France's Interior Ministry confirmed emergency services are dealing with a "security incident" at the world-famous Champs-Élysées.

Paris police on Monday said they are "in control" after armed police stormed the shopping district in the city centre.

Witnesses say a police van was hit by another vehicle which was the on fire sparking the major response.

"It looks like this was a deliberate act," Interior Ministry Spokesman Pierre-Henry Brandet told reporters at the scene.

The Paris prosecutor's counter-terrorism unit said it had opened an investigation into the incident, which occurred only a short walk away from the Elysees presidential palace and the US embassy.

Brandet said it was very likely that the driver, who had been armed, was dead.

A police bomb squad is also present.

One witness, who was just 20 metres from the scene, said: “Large bangs followed by what sounded like shots fired near a car with smoke coming out of it on Champs Elysees.”

Armed officers have been pictured surrounding a police cordon after reports of a man on the ground.

Some reports suggest he was dragged from the car.

An image has now appeared of a bloodied man lying face down on the floor, while the body is searched by a bomb robot.

Police in Paris are asking people to stay clear of the area.