Witnesses and police officials said that multiple gunmen were involved, and that they were seen armed with AK47s and pump action shotguns. According to France's AFP news agency, the men were armed with at least one rocket launcher.
A police spokesperson confirmed that the death toll had risen to 12, and that up to ten others were injured. Five were reported to be in a critical condition.
Officials said two police officers were among those killed, and that the other ten were journalists. Luc Poignard, an official with the French police union official, had earlier confirmed that three officers had been injured and that the attackers had escaped in two vehicles.
Video footage posted to social media showed armed gunmen running through the streets of Paris, shooting with automatic weapons and shouting "Allahu Akbar".
French President Francois Hollande has travelled to the scene in Paris's 11th arrondissement after what he called the "terrorist attack".
Speaking to reporters, he repeated the figure of 11 dead, as well as stating that four of those injured were "between life and death".
He said it was the latest in a series of terrorist incidents on French soil, and that the nation was in a state of shock. "We are a country of liberty, and because of that we receive threats," he said.
Paris has raised its terror alert to the highest setting in the aftermath of the attack, while the gunmen themselves are still reported to be on the run.
The Charlie Hebdo magazine is most famous internationally for publishing a controversial series of cartoons depicting the Prophet Mohammed in 2012.
A year earlier, its offices had been firebombed after a spoof issue featured a caricature of Mohammed on its cover.
According to Le Monde, a source said that one of the magazine's cartoonists, known as Riss, was injured during the attack.
The latest post sent by the Charlie Hebdo Twitter account was a picture of the Isis militant group leader, Abu Bakr al-Baghdadi.
Gilles Boulanger, who works in the same building as the Charlie Hebdo offices, likened the scene to a war zone.
He told the BBC: "A neighbour called to warn me that there were armed men in the building and that we had to shut all the doors.
"And several minutes later there were several shots heard in the building from automatic weapons firing in all directions.
"So then we looked out of the window and saw the shooting was on Boulevard Richard-Lenoir, with the police. It was really upsetting. You'd think it was a war zone."
Another witness, Benoit Bringer, told TV station France Info: "We heard shouting in the street. We saw hooded men carrying Kalashnikovs enter the building. We called the police. After a few minutes we heard heavy firing, a lot of firing. We went upstairs onto the roof.
"After about ten minutes we saw two armed men come out into the street. Three policemen arrived on bikes but had to leave because the men were armed. There was a lot more shouting in the street, a lot more gunshots. The attackers took off in a car."
David Cameron led the British response to the unfolding incident, condemning the attack on Twitter.
"The murders in Paris are sickening," he said. "We stand with the French people in the fight against terror and defending the freedom of the press."