One of their main demands was to free Jirair Sefilian, an opposition politician whom the authorities have accused of plotting civil unrest. Sefilian was jailed in June over allegations of illegally possessing weapons.
Armenia's security service said one policeman had been killed and two wounded in the violence, but that negotiations were now underway to resolve the standoff peacefully.
Two hostages had been freed, it said. Armenian news agencies cited police sources as saying seven or eight hostages remained. Photographs from the scene show the area ringed with white armored vehicles.
Though far smaller in scale, suggestions by one opposition politician that an armed uprising was underway stoked speculation that the hostage takers had drawn inspiration from an unsuccessful coup attempt in neighboring Turkey.