Five hostages and two militants were killed when a grenade was detonated by one of the terrorists as Indian commandos entered the five-storey Chabad Lubavitch Jewish center, the country's National Security Guard (NSG) Director General J K Dutt said.
A standoff, however, is continuing at a luxury hotel, the Taj Mahal, where at least one militant is said to be holed up. All the hostages have been freed from inside the hotel, local police officials said.
In another luxury Trident-Oberoi Hotel in central Mumbai, troops freed over 140 guests killing two militants, police said.
Over 150 people have died, including eight foreigners, with more than 300 injured since terrorists swept through Mumbai on Wednesday night, armed with submachine guns and grenades attacking hotels, the railway station, a cinema, and a hospital.
India's deputy interior minister, M.L. Kumawat told a news conference in New Delhi that three Germans, two people from Oman, and one each from Canada, Japan and Australia have died.
Police said 24 bodies were discovered inside the hotel on Friday.
A previously unknown Islamist group calling itself the Deccan Mujahideen has claimed responsibility for the attacks.
India's foreign minister had earlier blamed the attack on Pakistan, in a statement likely to aggravate tensions between the two nuclear powers, which have in the past fought three wars.
"According to preliminary information, some elements in Pakistan are responsible," Pranab Mukherjee was quoted as saying by the Press Trust of India.
