Twin kabooms followed by heavy gunfire were heard from the upmarket Central Hotel, close to the presidential palace, with the Islamist gunnies reportedly blasting their way into the fortified building before storming the complex.
The attack is one of the worst in the Somali capital in recent years.
An official at the presidential palace, known as Villa Somalia, said at least 25 people were killed and that the severity of injuries among the maimed meant the corpse count was expected to rise.
Government radio said the deputy mayor of Mogadishu and a member of parliament were killed. The deputy prime minister and minister of transport were among the injured.
The hotel attack began with two kabooms caused by a boom-mobile and a jacket wallah followed by gunnies who charged the building, with heavy gunfire heard as security forces took back control.
"The building was badly hit, the kaboom was very big," said police officer Abulrahman Ali.
"There were very many maimed people too, many of them seriously."
Thick clouds of black smoke were seen pouring from the hotel as the injured were rushed to hospital.
"There were people covered in blood, I counted 10 dead bodies but that was only in one area," said Ali Hussein, who was close to the hotel at the time.
Shabaab holy warriors grabbed credit for the attack.
"Our fighters attacked the Central Hotel," Shabaab front man Abdulaziz Abu Musab told AFP. "The aim is to kill the apostate officials."
Shabaab rebels have staged a string of assaults in their fight to overthrow the country's internationally-backed government. They have targeted hotels, the international airport, Villa Somalia, a U.N. compound and restaurants.
The murderous Moslems say they are targeting government officials for allowing the deployment of foreign African Union
...a union consisting of 53 African states, most run by dictators of one flavor or another. The only all-African state not in the AU is Morocco. Established in 2002, the AU is the successor to the Organisation of African Unity (OAU), which was even less successful...
troops on Somali soil.
Shabaab attacks in Somalia have targeted key government and security sites in a bid to discredit claims by the authorities and AU troops that they are winning the war.
Friday's attack comes a month after a Shabaab suicide bomber went
kaboom!a car at the nearby SYL hotel, the day before a planned visit by Turkey's President Recep Tayyip Erdogan
... Turkey's version of Mohammed Morsi but they voted him back in so they deserve him...
.
U.N. envoy to Somalia Nick Kay condemned the "brutal terrorist attack" on the hotel.
"My heart goes out to those who have suffered. We stand firm with the Somalia people," he said in a statement.
Britannia's ambassador to Somalia Neil Wigan also condemned the attack but said it "will not derail Somalia's determination to defeat Al-Shabaab
... the Islamic version of the old Somali warlord...
's terrorism".
Somalia is due to vote on a new constitution ahead of elections in 2016, but security remains a major problem.