The incident follows a similar attack in a prison in Rostov-on-Don in June. The hostage-takers claimed to be part of the Islamic State terrorist group,
Euronews reports.
Russian special forces have killed four prisoners at a penal colony in the southwest of the country who were reported to have taken hostages and killed a member of staff.
The National Guard of Russia, the country's gendarmerie, announced the operation on Friday after news emerged of the hostage situation. All the individuals taken have now been freed, it said.
The incident occurred at penal colony 19 in the town of Surovikino, 130 kilometres west of Volgograd. Authorities have not yet specified the exact number of attackers, hostages and victims, and the information circulating on various Telegram channels differs widely.
An explicit, unverified video circulating on several Russian social media channels shows at least three assailants brandishing knives and standing over what appear to be injured or dead prison guards, lying in a pool of blood.
One of the hostage-takers states in the clip that the group is affiliated with the Islamic State (or Daesh). According to several local channels, the attackers demanded a helicopter and $2 million (€1.8 million).
Russian media reported that the country's security services were preparing to storm the building.