The seven militants, who killed 20 at a restaurant in Dhaka, were local Bangladeshis and authorities had tried before to arrest five of them, police said, as the country began a two-day period of mourning today.
"All gunmen were Bangladeshi. Five of them were listed as militants and law enforcers made several drives to arrest them," national police chief Shahidul Hoque told reporters in Dhaka late on Saturday.
Police have yet to comment on Islamic State's claims of responsibility, but security sources said authorities were probing deeper for possible ties between the gunmen and trans-national Islamist extremist groups given the scale and sophistication of the attack.
Bangladesh has blamed two home-grown groups for a series of grisly killings targeting liberals or members of minority groups over the past 18 months, and local authorities have maintained that no operational links exist between Bangladeshi militants and international jihadi networks.
Islamic State posted photos on Saturday of five fighters it said were involved in the killings but its claim has not been confirmed.
Italian media said several of the Italians victims worked in the garment industry, and the attack will frighten expatriates working in the $26 billion garment sector that accounts for 80 per cent of its exports.