Fresh explosions and gunfire have been heard at Mumbai's Taj Mahal Palace hotel, one of several sites targeted in attacks that have killed at least 130.
Indian troops battled with the gunmen for most of the day after swooping on the building at first light.
The bodies of five hostages were found inside a Jewish centre, Israeli diplomats said, after a long battle.
India's foreign minister said "elements with links to Pakistan" were involved in the attacks.
However, his Pakistani counterpart has urged India not to bring politics into the issue, saying "we should join hands to defeat the enemy
The stand-offs began late on Wednesday when gunmen armed with automatic weapons and grenades opened fire indiscriminately on crowds at a major railway station, the two hotels, the Jewish centre, a hospital and a cafe frequented by foreigners.
Earlier, nearly 100 guests and staff - many of them westerners - were rescued from the Oberoi-Trident hotel, and the battle with gunmen there appeared to be at an end.
Around 370 people have been injured since Wednesday, while the death toll is expected to rise as more bodies are discovered.
One security official said eight foreigners were known to have died, among them three Germans, a Japanese, Canadian and Australian.
'Bodies in hall'
Amid conflicting reports about the end of the siege at Nariman House, home to the Jewish outreach group Chabad Lubavitch, it emerged that several of the small group of hostages held inside had been killed.
"Five bodies of hostages have been found inside the Chabad House. We still don't know whose bodies," Israeli diplomat Haim Choshen said.
Orthodox Jewish rescuers sent to Mumbai to assist also confirmed that five bodies had been found. Two kidnappers were also reported killed.
Earlier, an ambulance had been seen pulling up at the building and taking one person away. It was not clear if it was a hostage.
A woman and child has been seen leaving the building, but it was unclear whether they had managed to escape or were released.
The child was identified as the two-year-old son of Rabbi Gavriel Noach Holzberg, the main representative at the ultra-orthodox outreach centre.
Having swooped at first light, commandos blew up a part of the wall of the fourth floor of the building, lowered down onto the roof by ropes from helicopters and dropping smoke bombs to create confusion.
Soldiers were said to have been tentatively moving down through the building, trying not to cause casualties among the hostages.
Indian security forces have said they believe at least one gunman with "two or more hostages" remains in the Taj Mahal Palace hotel.
Large explosions and gunfire have been ringing out from the building for most of the day after truckloads of commandos entered the hotel. A journalist and bystander outside the hotel were taken to hospital after being hit by shrapnel.
Indian commandos who managed to enter other parts of the Taj Mahal say they found at least 30 bodies in one hall. The commandos also said the militants were well aware of the layout of the hotel, and that they had recovered a Mauritius identity card as well as guns and money.