President Francois Hollande, who immediately headed to the scene of the shooting in Paris, described it as a "terrorist attack."
Hollande said 11 people were killed and another four were in critical condition after the attack, branding it an "act of exceptional barbarism" and calling an emergency cabinet meeting.
Later police said 12 people killed in the attack.
He called for "national unity" as the government raised its alert level to the highest possible in the greater Paris region.
He added that "several terrorist attacks had been foiled in recent weeks".
Wednesday's shooting is one of the worst attacks in France in decades.
A source close to the investigation said two men "armed with a Kalashnikov and a rocket-launcher" stormed the building in central Paris and "fire was exchanged with security forces".
The source said a gunman had hijacked a car and knocked over a pedestrian while attempting to speed away. He added that two police officers had died in the attack.
Television footage showed large numbers of police in the area, bullet-riddled windows and people being carried away on stretchers.
It was not immediately clear what happened to the attackers.
The satirical newspaper gained notoriety in February 2006 when it reprinted cartoons of the Prophet Mohammed that had originally appeared in Danish daily Jyllands-Posten, causing fury across the Muslim world.