Here are the latest developments in this story:
"The combat operation is over, the security personnel are carrying out a clearance operation and hopefully they will clear the building in a while," a police officer, Abdullah Khan, told Agence France Presse.
The Taliban militants, wearing suicide vests and carrying guns, had stormed the army-run school. They barged into classrooms and pulling out students from under benches, shot them, said Shahrukh Khan, a boy who survived the attack. (Read: Peshawar Student Describes Attack)
Reports said the militants even set a teacher on fire after pouring gasoline on her. Hours into the siege, heavy gunfire and multiple blasts were heard from inside the school.
The attackers, dressed in military uniforms, had entered the school from a graveyard and through the rear gate.
Seven army personnel, including two officers, were wounded in the operation.
Taliban spokesman Muhammad Khorasani said the attack was a retaliation for a major military offensive in the region. "We want them to feel the pain," he said, adding the militants had been ordered to "shoot the older students but not the children".
Doctors at Peshawar's Lady Reading Hospital said many of those injured were in critical condition. They said many had been shot in head. The hospital has reported a shortage of blood and has sought blood donations urgently.
In a series of tweets, Prime Minister Narendra Modi called it a "senseless act of unspeakable brutality". "This dastardly and inhuman attack exposes the real face of terrorism," tweeted Home Minister Rajnath Singh.
Condemning the attack, Pakistan Prime Minister Nawaz Sharif, who rushed to Peshawar, said, "This is a national tragedy, these were my kids, this is my loss". A three-day state mourning has been declared.
But Mr Sharif made it clear that the action against Taliban has entered a crucial phase and will not be stopped. "Operation Zarb-e-azab will continue until terrorism is completely wiped out from the country. We have had talks with Afghanistan," he said.
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