Update: The gunman has released deputy mayor Sepp Misslbeck, the Donau Kurier newspaper said. There is no word about the other two hostages, believed to be Misslbeck's receptionist and another municipal employee.
The 23-year-old suspect was sentenced to one year and eight months' probation in July for stalking a 25-year-old female town hall employee, the local Donau Kurier newspaper said.
A patient, believed to be the suspect, was missing from the city's Danvius psychiatric clinic, where the suspect had been undergoing psychiatric treatment since sentencing, the paper said.
The man went to the city's old town hall at about 9 am (07:00 GMT), where he rounded up several people on the second floor.
Police blocked off the town centre of Ingolstadt north of Munich and contacted the hostage taker by phone, while Merkel's conservative party cancelled the party event planned ahead of September 22 elections.
Bavaria's state interior minister Joachim Herrmann also travelled to Ingolstadt, where a large number of police cordoned off the crime scene.
Ingolstadt, in Upper Bavaria, is a city of 125,000 best known as the headquarters of luxury carmaker Audi and as the place where the secret society the Illuminati was founded in 1776.
Chancellor Angela Merkel has cancelled her visit to the city of Ingolstadt, southern Germany, for an elections rally in the wake of the hostage-taking.
A man claiming to be armed took three hostages in the city hall of the southern German city of Ingolstadt about 9 am local time (07:00 GMT) on Monday.
Chancellor Angela Merkel had been scheduled to make a campaign speech in the town square later in the day, as Germany readies for September 22 elections but cancelled the event after the standoff began. It is unclear whether the incident was connected to her visit.
Bavarian Premier Horst Seehofer, who had been scheduled to appear alongside the chancellor, said the safety of the hostages had "absolute priority."
An armed man was holding several hostages in the southern German city of Ingolstadt, near Munich, on Monday, police said.
The man went to the city's old town hall at about 9 am, where he rounded up several people on the second floor. He has not issued any demands, an Ingolstadt police spokesman said.
It is unclear what kind of weapon the man has or how many hostages there are. Police told the local Donau Kurier newspaper the number of hostages was in the single digits.
A deputy mayor, Sepp Misslbeck, is believed to be one of the hostages. Mayor Alfred Lehmann was not in the building, town hall sources told the newspaper.
Chancellor Angela Merkel planned to hold a campaign rally in Ingolstadt later Monday. It is unclear whether the hostage-taking was connected to her visit.
VoR correspondent Danielle Hanneman discussed the incident with the press secretary of the Ingolstadt police:
It was reported that people were taken hostage in the old town hall this morning. What exactly happened?
Yes, we can confirm this. The hostage took place in the old town hall at around 9 am. Several people are being held hostage by the criminal. He says he is armed, but we cannot say anything about what king of weapons he has or who is.
Has he put forward any demands?
My colleagues are contacting him by telephone. But so far, he hasn’t put forward any demands.
The Donaukurier newspaper rumored that the criminal is probably a stalker who was pursuing a woman, a town hall employee. Is that true?
Normally, we provide maximum reliable information. But we cannot, for the moment, confirm these rumors. Unfortunately, I can’t say what the criminal’s motives are. I hope you understand.
Voice of Russia, dpa, RT, AFP