A suspected terrorist has died after ramming a car carrying weapons and explosives into a police van as it drove down Paris’ famous Champs Elysees avenue.

The popular tourist destination in downtown Paris was locked down Tuesday morning (AEST) after the attack, in which the driver was killed after his vehicle exploded on impact.

It is not clear exactly how the suspected terrorist, identified as a 31-year-old Paris resident, died.

French officials say the situation is under control, but could have been much worse.

Interior Minister Gerard Collomb said the man’s car was carrying weapons and explosives that could have caused the blast.

“This once again shows that the threat level in France is extremely high,” Collomb told journalists not far from the scene.

A police source told Reuters that the man was known to security services.

The car hit the front of the police van as it was overtaking a convoy of police vehicles, a police spokeswoman said.

No bystanders or police were hurt.

France has been on high security alert following a series of militant Islamist attacks in recent years, including the shooting of a policeman in an Islamic State-claimed attack on a police bus on the Champs Elysees in April.

The Paris prosecutor’s counter-terrorism unit said an investigation had been opened into the incident only a short walk away from the Elysee presidential palace and the US embassy.

Eighty-six people died in a truck attack on a crowd in Nice last year and similar incidents have occurred in other European cities.

The incident in Paris came hours after a van ploughed into Muslim worshippers near a mosque in London, injuring 10 people.

In the Paris incident, eyewitnesses saw the man being pulled from the car as it burned.

Footage recorded at the site, a short walk from the Elysee presidential palace and the US embassy, showed yellow smoke billowing from the car.

“We saw big flames coming out of the front windows of the car,” 16-year-old eyewitness Adrien Cairo told Reuters.

“Then suddenly we saw four policemen arrive, they knocked on the window, they said ‘Sir, are you alright? Can you hear us?’

He said police broke the window and pulled the man from the car while other police used fire extinguishers to put out the blaze.

President Emmanuel Macron said last month his government would ask parliament to extend wider search and arrest powers granted under a state of emergency called after Islamist gunmen and suicide bombers killed 130 people in and around Paris in November 2015.

Some magistrates and human rights groups have protested against the proposal that would enshrine in ordinary law measures currently in place under the state of emergency.