Malaysian police stormed a preschool on Thursday to free 30 children and four teachers held hostage by a man armed with a hammer and a machete.

Police commandos armed with assault rifles fired teargas into the school in a two-storey house in Muar, a town in southern Johor state about two hours drive from Singapore, before breaking down the doors and storming into the building to rescue the children.

"All the 30 children aged between three and give years and their four teachers are safe," the deputy police chief of Johor state Jalaluddin Abdul Rahman told state news agency Bernama.

Jalaluddin said the suspect, believed to be mentally unstable, was shot in the head by police and was now in critical condition.

Police forensics personnel scoured the school building which houses the school for evidence, according to a Reuters photographer at the scene.

Furniture were strewn in one of the classrooms and there were blood stains on the floor. The school's staff were crying as their statements were recorded by police, the Reuters witness said.

The man barged into the preschool on Thursday morning and locked all the doors before threatening to kill the children unless he was given a gun.

Police then sealed off the premises. A psychiatrist was sent in to talk to the man, and the children were heard singing in an attempt to calm him down, Bernama reported.

Police then started negotiations to release the hostages.

Reuters