The driver had fled after scuffling with the suspect and a passenger also escaped, reports Al Novack of CBS radio station KYW. Three other people who remained on the bus were released a short time later. No one was injured.
During the standoff, the man told authorities he blamed the Showboat Casino-Hotel for the suicide of his brother, who he said had a bad gambling problem, according to a person with knowledge of the standoff who spoke on condition of anonymity because he was not authorized by law enforcement to release the information.
The suspect, who was not identified, was ordered by FBI agents on the scene to strip down to his inner clothing and complied at about 4:24 a.m., said state police Sgt. Stephen Jones.
"He just gave up peacefully," Jones said.
He was taken to Atlantic City police headquarters for questioning. No charges had yet been filed, Jones said, but added the FBI plans to file federal charges against him.
Atlantic City Police Chief John J. Mooney said Showboat security called police shortly after 10:30 p.m. to report there was a man on a shuttle bus with a gun.
Jones said the suspect, who was wearing what police believed to be an explosive device strapped to his body, had planted a suspicious-looking device in a men's room inside the casino near the House of Blues nightclub, but it was later determined to be a hoax device, Jones said.
No gun was immediately found after the man was taken into custody, Jones said.
Police K-9 teams swept the casino and the hotel and did not find anything else suspicious, Jones said.
The casino, which had been closed down during the standoff, was allowed to reopen shortly after 5 a.m.
Acting Atlantic City Mayor William Marsh said a robot delivered a cell phone to the bus shortly after the standoff began so police could communicate with the man.
The man demanded money, Marsh said, but it was not certain how much. He also had offered to surrender after being allowed to drive the van to his relatives' home and speak with them first - a request police rejected.
Alyce Parker, a spokeswoman for Harrah's Entertainment Inc., which owns the Showboat, said the bus was a shuttle that runs between Harrah's four properties in the coastal gambling resort, including Caesars Atlantic City, Bally's Atlantic City and Harrah's Atlantic City in addition to the Showboat.
The area in front of the Mardi Gras-themed casino where cars and buses load and unload passengers was cleared by authorities dealing with the situation, and the bus was surrounded by police vehicles and the robot.
Police shut down Pacific Avenue, the major thoroughfare linking the resort city's Boardwalk casinos, in the area of the Showboat.
Tony Demetro of Atlantic City, who was playing blackjack, said Showboat staff fanned out across the casino floor around 11 p.m. and asked everyone to leave the tables and walk outside.
"They locked down all the tables, covered them with plastic covers and asked everybody to leave. It was pretty calm," he said.
Mark Petro, also of Atlantic City, said he was playing a slot machine when word spread that there was a bomb in or near the casino.
"I heard the word 'bomb' about a hundred times," he said. "We all had to evacuate the building right away. It was like practicing a fire drill at school."
Demetro said the Showboat sent hotel guests to the nearby Trump Taj Mahal Casino Resort, where they were temporarily put up in a ballroom.
But not everyone made it there. Doris Kinsler of Lynchburg Va. was with her husband and two other relatives in their room on the 15th floor of the Showboat hotel, watching television the entire night. No one told them to evacuate, or that there was any potential danger, she said.
"I am mad as hell, and I don't care who knows about it," she said. "If this place blew up, we would have gone with it."
Kinsler said she opened the door to her room at around 5 a.m., and immediately knew something was not right.
"There was dog poop all up and down the hallway," she said. "It was from the police dogs. Nobody let us know anything, and I am very upset."
The Harrah's vans have been at the center of a bitter dispute between the company's four casinos and drivers of jitneys, the aqua-colored mini-buses that transport people up and down the resort's main drags and are an iconic part of Atlantic City's image.
The City Council proposed a law banning casinos from operating shuttles that would compete with the jitneys, and was expected to consider the measure at Wednesday night's meeting.