A decapitated body daubed with Arabic writing was found at a U.S.-owned factory in southeast France on Friday after an assailant rammed a delivery van into gas containers at the site, triggering an explosion.
A source close to the investigation said the victim was the boss of the suspect, a delivery man. The two had gone to the company to make a delivery but the assailant killed and beheaded his 50-year-old manager before entering the secured site in the vehicle.
The attacker was injured in the blast and arrested on the site. His wife was later taken into custody and authorities were questioning at least one other suspected accomplice.
Speaking from a European Union summit in Brussels, French President Francois Hollande described it as a terrorist attack and said all measures would be taken to stop any future strikes on a country still reeling from Islamist assaults in January.
Referring to a separate gun attack at a hotel in Tunisia which killed 28 people and a suicide attack in Kuwait that killed 25, Hollande called for nations to work together to combat security threats.
"There is no other link other than to say that terrorism is our common enemy," he told reporters on his return to Paris.
Interior Minister Bernard Cazeneuve named the suspect as Yassin Sahli. He said Sahli did not have a criminal record but had been under surveillance from 2006 to 2008 on suspicion of having become radicalized by Islamist associates.
The attack happened at an industrial zone near the town of Saint-Quentin Fallavier to the south of the city of Lyon. Its air, rail and road links have made it one of Europe's major logistics hubs, with through-traffic of 5,000 trucks a day.
Sources close to the investigation said Sahli was a 35-year-old professional driver who lived in the Lyon suburbs. Europe 1 radio interviewed a woman they identified as his wife.
"In the morning he left for work and didn’t come home between noon and 2:00, I was waiting for him," she told Europe 1 radio, saying she and her family of three children lived normal lives as Muslims. "My heart is about to give out."
French BFMTV television filming outside Sahli's apartment showed pictures of police leading out a woman, her head covered by a blanket, into a waiting car. It said forensic police were carrying out searches on the ground-floor apartment of the modern, concrete apartment block.
The attack, which wounded two other people with the blast, underlined again the difficulty for authorities across Europe and elsewhere of protecting so-called "soft" targets against strikes by assailants operating by themselves or in small undercover cells.
Police sources earlier said the decapitated body was discovered at the site, along with a flag bearing Islamist inscriptions.
Local newspaper Le Dauphine said the head, covered in Arabic writing, was also found hanging from a fence.
France, which has deployed aircraft to the international coalition fighting Islamic State insurgents in Iraq, has long been named on Islamist sites as a primary target for attacks.
In January, Islamist gunmen killed 17 people in the offices of the Charlie Hebdo satirical weekly and a Jewish food store.
In April, Prime Minister Manuel Valls said no fewer than five attacks had been thwarted in the country since then.
Noting that hundreds of French nationals are in Syria where they risked being radicalized by Islamist fighters, Valls has said repeatedly that France has never seen a higher threat level.
The site of Friday's attack belonged to Air Products, a U.S. industrial gases and chemicals company. It was immediately ringfenced by police and emergency services.
Air Products said its crisis and emergency response teams were "working closely with all relevant authorities".
The chairman and CEO of Air Products is Seifi Ghasemi, who in 2011 testimony to a U.S. Senate committee described himself as Iranian-born. Mainly Shi'ite Iran is a sworn enemy of Sunni-dominated Islamic State.
No group claimed responsibility for the attack and the motive was unknown.
According to French regulations applicable to zones where gases and chemicals are handled, the site would have been required to implement security arrangements at the low end of the European Union's so-called "Seveso" scale, named after the location of an industrial accident in northern Italy in 1976.
Jean-Paul Bonnetain, prefect of the local Isere region, said the vehicle used to gain access to the site had the necessary authorization to do so.
Cazeneuve said the government had ordered security to be stepped up around all sensitive sites and Hollande announced that security arrangements in the region would be placed at their highest level for the next three days.