Two British workers are reported to be among the dead following an Algerian military raid to free hostages at a desert gas plant.
Algerian state television quoted a hospital as saying four foreigners had been killed and seven wounded amid a confused picture of the crisis. Algerian authorities reportedly confirmed "several deaths and injuries".
The report came shortly after Prime Minister David Cameron said the country should be "prepared for the possibility of further bad news".
One British citizen was already confirmed dead in the hostage incident in which several others are caught up. Earlier, there were reports that between six and 35 hostages and eight and 15 rebels had been killed in the fighting.
Mr Cameron spoke after it emerged Britain had not been pre-warned of the military rescue operation despite the Prime Minister asking his opposite number to keep him fully informed.
"It's a fluid situation, it's ongoing, it's very uncertain," Mr Cameron said. "We should be prepared for the possibility of further bad news, very difficult news, in this extremely difficult situation."
The Government's emergency Cobra committee has met twice in one day, with Mr Cameron in the chair, and he said they would continue "working around the clock to do everything we can to keep in contact with the families, to build the fullest possible picture of the information and the intelligence".
Foreign Secretary William Hague is cutting short a visit to Australia to return to the UK to help deal with the crisis. Mr Cameron discussed the unfolding violence with US president Barack Obama and French president Francois Hollande earlier.
The militant group believed to be holding the hostages claims that it carried out the attack in retaliation for French military intervention against al Qaida-backed rebels in neighbouring Mali.
The Irish Government said that one of its nationals - Stephen McFaul, 36, from west Belfast - had been freed and has made contact with his family.