The Pakistan Army had initially said that the situation was under control.
It all started at around 11:30 am on Saturday when terrorists, dressed in Army fatigues and driving a white van, attacked the Pakistan Army Headquarters in Rawalpindi.
They drove upto the heavily fortified compound, firing and throwing grenades. Their first targets were the checkpoint guards. After shooting them the attackers jumped out of the van trying to force their way in.
The police and the Army hit back and the area was cordoned off; helicopter gunships gave the air cover.
Some reports indicate that top officials of the Pakistan Army were inside the building, trapped on the top floor. The gunbattle went on for 45 minutes in which four terrorists were killed.
But just when it seemed all over, firing was heard again and it was soon known that two attackers had managed to escape. A large manhunt was underway.
A splinter group of the Tehreek-e-Taliban Pakistan, once headed by Amjad Farooqi, claimed responsibility for the attack.
Based in central Punjab the group had planned the assassination of President Musharraf, and may have even had a hand in the attack on the Sri Lankan cricket team.
The strike on the Army Headquarters follows a series of bombings in Northwestern Pakistan where 50 people had died in a blast on Friday. It also comes as the Pakistan Army prepares for a major operation against the Taliban in South Wazirstan.
Early this year, the Taliban had pushed to within 100 km of Islamabad, raising fears for nuclear-armed Pakistan's stability. Then, came the fight back -- a sustained offensive was launched in the Swat valley which led to the killing of Baitullah Mehsud.
But the fresh slew of terror attacks could well put the Pakistan government's plans on the backburner.