Police received a 911 call about a man with a gun inside the Prudential Real Estate office building at 10:30 a.m., Valparaiso police Sgt. Mike Grennes said.
A worker reached at a nearby Family Express store told the station that their corporate office ordered them to shut down after reports that a man had shot two people and was holding hostages. That information could not be immediately confirmed by police.
A 911 dispatcher said there were reports that shots were fired but it was unclear if the gunfire happened inside or outside the building.
As of just before noon Friday, the man was still in the building. A witness from a nearby tire store tells WBBM Newsradio that the gunman has at least two hostages. Shortly before 1 p.m., about five people were seen leaving the building, but the standoff continued.
Police say they know who the man is, but are not releasing his identity. Hostage negotiators have been able make contact with the suspect.
CBS Chicago reported heavily-armed police officers from Valapariso and the Porter County, Ind., sheriff's department were surrounding the insurance office building as of 11:40 a.m. central time.