Security forces with the help of 30 French troops - stormed the Splendid Hotel in Ouagadougou's business district more than five hours after it was attacked by the jihadists.
Some hostages remain trapped inside the hotel, which was accidentally set on fire during the rescue attempt.
The organization claims that the operation was 'revenge against France and the disbelieving West', according to New York Times foreign correspondent Rukmini Callimachi.
A witness who gave only his first name, Gilbert, said that when security forces first arrived, they turned around rather than confront the attackers.
'But we know that the gunmen won't get out of the hotel alive,' he said. 'Our country is not for jihadists or terrorists. They got it wrong.'
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