Two British workers are reported to be among the dead following an Algerian military raid to free hostages at a desert gas plant.
Algerian state television quoted a hospital as saying four foreigners had been killed and seven wounded amid a confused picture of the crisis. Algerian authorities reportedly confirmed "several deaths and injuries".
The report came shortly after Prime Minister David Cameron said the country should be "prepared for the possibility of further bad news".
One British citizen was already confirmed dead in the hostage incident in which several others are caught up. Earlier, there were reports that between six and 35 hostages and eight and 15 rebels had been killed in the fighting.
Mr Cameron spoke after it emerged Britain had not been pre-warned of the military rescue operation. The Government's emergency Cobra committee has met twice in one day, with Mr Cameron in the chair, and he said they would continue "working around the clock to do everything we can to keep in contact with the families, to build the fullest possible picture of the information and the intelligence".
The militant group believed to be holding the hostages claims that it carried out the attack in retaliation for French military intervention against al Qaida-backed rebels in neighbouring Mali.
The Irish Government said that one of its nationals - Stephen McFaul, 36, from west Belfast - had been freed and has made contact with his family.
Algerian state news agency APS said the raid by the country's special forces at the gas complex in Illizi province, close to the Libyan border, was over.
The crisis began on Wednesday morning when heavily-armed militants launched a dawn raid, killing two people and injuring six others. They claimed to have seized 41 foreign workers including Britons, Americans, Norwegians and Japanese.
A spokesman for the militants claimed that 35 hostages and 15 rebels had been killed when Algerian helicopters strafed the site in Thursday's operation. The militants - reportedly led by the veteran jihadist Mokhtar Belmokhtar - threatened previously to "eliminate" the hostages if they were attacked.