The jihadists attacked the Raddison Blu in the capital, Bamako, around 7am local time. The hotel was believed to be full of foreigners.
Automatic weapons fire was later heard inside the 190-room hotel, where the attackers reportedly went from floor to floor and took 140 guests and 30 staff hostage.
Witnesses described how the gunmen allowed about 20 hostages to leave after they were able to recite verses of the Koran.
The BBC Online reported that at least three other hostages - two locals and a French citizen - had died.
Malian army commander Modibo Nama Traore said 10 gunmen were involved, firing shots and shouting "Allahu Akbar", or "God is great" in Arabic before shooting at guards and seizing their captives.
Just after midnight (NZT), American and French forces were reported to have entered the hotel.
Accompanied by Malian soldiers, they were moving from room to room and rescuing guests. The fate of the jihadists was unknown.
The hotel attack comes just days after Isis gunmen massacred 129 people in Paris, reportedly in retaliation for the French government's decision to carry out air strikes against the extremists. Early today, there were fears that the Bamako attack may be linked to the Paris atrocities. France is Mali's former colonial ruler.
The hotel was hosting a major mining conference that was about to finish, according to Aislinn Laing, Africa correspondent for Britain's Telegraph newspaper group.
Those due to speak included the Malian prime minister, government ministers, African Development Bank representatives and directors of major mining firms operating in Africa.
In 2012, following a military coup, Islamic extremists took control of northern Mali, prompting a French-led military intervention that forced the extremists from northern towns and cities, though the north remains insecure and militant attacks have extended farther south this year.
In March, masked gunmen shot up a Bamako restaurant that was popular with foreigners, killing five people.
There are 1000 French troops in Mali, as well as many United Nations troops.
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