Heavily-armed Islamic militants who took up to 250 Pakistani school children hostage in a northwestern town have surrendered to negotiators and started to release the students, according to witnesses.
"They have surrendered themselves to the local jirga (tribal council) along with their weapons and released the children," ministry spokesman Brigadier Javed Cheema said.
Earlier, the gunmen stormed the school in northwest Pakistan and took around 250 children and several teachers hostage.
The insurgents, equipped with rocket launchers and grenades, demanded safe passage from the school, which is located in the village of Domail, 250 kilometres (155 miles) west of Islamabad.
The students are mostly aged between eight and 12.
"About seven terrorists have taken the school children hostage. There about 200 to 250 children," interior minister Hamid Nawaz said.
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"The terrorists are demanding safe passage, the provincial government is in negotiations with them. We hope that the matter will be resolved peacefully," he added.
Police have surrounded the school and tribal elders are trying to negotiate with the gunmen. The army is ready to help but has not been called in.
The incident comes amid a tide of violence in Pakistan's northwestern borderlands with Afghanistan that has raised fears for the country's stability ahead of key elections on February 18.
Militants holed up at the school after they abducted a health worker in the village and drove off with him, a senior local police official said.
Police gave chase and in the ensuing shoot-out one militant was killed and a policeman was injured, while the medic escaped, he said.
Officials in Pakistan have confirmed that at least 250 schoolchildren between 12 and 18 years old and several teachers were taken hostage by at least seven militants inside a high school in Domail. After negotiations, the children were released.

"There were 200 to 250 children in the school and about seven militants," said Hamid Nawaz, the Interior Minister of Pakistan.

"The criminals have surrendered to the jirga along with their weapons. No children have been hurt and all have been released," said Javel Iqbal Cheema a spokesman for the Interior Ministry. At least one officer was injured and one militant was killed in the battle.

According to reports, the militants were fighting police officers after kidnapping a "health worker" when they ran into the school for shelter. They were allegedly armed with several weapons including rocket launchers and grenades.