Police Sgt. Andy Hill said the gunman and hostages were inside a hearing room in a National Labor Relations Board office on the building's 18th floor. The floors immediately above and below were evacuated.
"We are not aware that anyone has been hurt or that any shots have been fired," Hill said.
Late Thursday, police said one hostage left under the pretense that she was going to the bathroom and was able to slip away to safety. Hill told CNN she was being debriefed by police.
Later, a second woman was released. "She asked to be allowed to leave and he let that happen," Hill said.
Hill said police had been in contact with the gunman, and that the man had been in touch with members of his family. Hill said authorities had successfully negotiated several things with the gunman, but he wouldn't elaborate.
Hostages' relatives and co-workers were at a nearby restaurant, a Fire Department spokesman said.
It was not immediately clear if the man was a participant in the labor proceeding, which an NLRB official called a "litigated trial," or a bystander.
The Arizona Republic reported on its Web site that one of the hostages had called his girlfriend, a Republic reporter, to outline the gunman's demands.
According to the newspaper, Chris Doyle told his girlfriend that the gunman wanted to see his wife and sister as soon as he walked out. If that happened, he would surrender, the paper reported.
Cornele Overstreet, an NLRB regional director, told the local Fox TV affiliate that the gunman first "shouted out something" and grabbed a secretary as she was coming out of a bathroom.
Sioux Jeffrey, who works in another office on the same floor, said a man from the labor office came to her workplace "and told us to evacuate. 'There's a man with a gun."'
Everyone quietly left and walked down the stairs, she said.