The move to end the standoff comes more than 10 hours after gunmen attacked a restaurant in a diplomatic area of Dhaka.
Around 40 people were taken hostage, a police official said. ISIS has reportedly claimed responsibility, but the claim has not been confirmed.
Akhmed Chatayev, a separatist now working with the terror group ISIS, is no stranger to authorities.
The two killed commanders include a figure who oversaw the capture of Mosul in 2014, the Pentagon said.
The sheriff in Shelby County, Tennessee, said a motive in the killings is still under investigation. The children were all under 6 years old.