At least two women and an unknown number of children were inside the house in Oued Ellil, a town on the outskirts of Tunis where a group was exchanging gunfire with security forces, the interior ministry said.
"We are not storming the house because there are women and children inside," said ministry spokesman Mohamed Ali Aroui.
"There are at least two men, at least two women and children (in the house). We also have information on the presence of explosives."
Authorities have demanded that the children and women be allowed to leave the house and the police, using loudhailers, also called out to the gunmen whom they described as "terrorists" to surrender.
The government said the gunmen are using the women and children as "human shields," and Aroui said one of the women was the "wife of one of the terrorists".
Police have been besieging the house for hours and gunfire exchanges could be heard intermittently late into the afternoon.
One policeman was killed in the firefight and another one was wounded.
"Our agent died of a bullet wound in the eye sustained in clashes with a terrorist group," a police official told AFP at the scene.
- Security beefed up -
With security beefed up ahead of the election, Aroui told Mosaique FM radio police had also clashed earlier Thursday with two "terrorists" in Kebili, 500 kilometres (300 miles) south of Tunis.
The suspects were arrested after killing a private security guard in the gunfight, he said.
The operation in Oued Ellil was launched based on information extracted from the two suspects, said Aroui.
The suspects had been "preparing operations in the area," he said, adding that two Kalashnikov assault rifles had been seized.
Elsewhere, two soldiers were lightly wounded in a roadside bomb blast in Sakiet Sidi Yussef near the Algerian border, defence ministry spokesman Belhassen Oueslati said.
And Tunisia announced a three-day closure from Friday of the border to people wanting to travel from politically unstable Libya for fear of possible terrorist attacks.
Sunday's election is seen as crucial to restoring stability in the North African nation, the cradle of the Arab Spring revolutionary movements.
Since the 2011 uprising that ousted veteran strongman Zine El Abidine Ben Ali, Tunisia has seen a proliferation of Islamists suppressed under the former autocratic president and the emergence of militant groups.
The jihadists have been blamed for a wave of attacks, including last year's assassination of two leftist politicians whose murders plunged the country into a protracted political crisis.
Jihadists have killed dozens of soldiers and police over the past three years, especially in remote mountain areas on the Algerian border.
The government has ordered the deployment of tens of thousands of soldiers and police for election day.
- Plots foiled -
On Monday, Interior Minister Lotfi Ben Jeddou said the authorities had foiled plots to bomb factories and attack foreign missions.
Rached Ghannouchi, leader of Tunisia's moderate Islamist movement Ennahda, told AFP the country's transition to democracy served as an example of how to defeat extremists such as the Islamic State group.
"The success of the Tunisian experience is in the international interest, especially in the fight against extremism and the fight against Islamic State and similar groups," he said.
"The Tunisian model is the alternative to the Daesh model," he said, using the Arabic acronym for the Islamic State group which has seized swathes of Iraq and Syria.
"This Tunisian model... brings together Islam and secularism, Islam and democracy, Islam and freedom for women," he said.
"One of the best ways to fight terrorism is to advocate moderate Islam because terrorism is based on an extremist interpretation of Islam," said Ghannouchi, whose party has emerged as the leading political force in Tunisia since the fall of Ben Ali.
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