Camouflage-clad commandos carried crying babies away from a school where gunmen holding hundreds of hostages freed at least 26 women and children Thursday during a second day of high drama that kept crowds of distraught relatives on edge.

Men and women wept with disappointment or hugged each other with relief as a man read the names of the freed hostages over a loudspeaker. Some of the toddlers released were naked, apparently because of the stifling heat in the school, where the hostage-takers refused to allow authorities to deliver water, food and medicine for the captives.

Tensions had risen earlier when the militants fired grenades at two cars near the compound ringed by security forces, and later two grenade blasts interrupted a nervous calm during the night. A policeman was reported injured by one of the explosions early Friday.

President Vladimir Putin (search) said everything possible would be done to end the "horrible" crisis and save the lives of the children and adults being held at School No. 1 in Beslan, a town in the southern region of North Ossetia (search).

But it was uncertain how much either side was willing to give to avoid further bloodshed in the siege -- the latest incident in a series of violent attacks believed linked to Russia's war in Chechnya (search). A dozen people were reported killed by the attackers when the school was captured Wednesday, but one official said Thursday that 16 died.

Reports after the standoff began Wednesday said the attackers demanded the release of people jailed after attacks on police posts in June that killed more than 90 people in Ingushetia, a region between North Ossetia and Chechnya. But officials said Thursday that the hostage-takers had not clearly formulated their demands.

Late Thursday, Lev Dzugayev, a North Ossetian official, said his previous statement that 354 hostages were seized Wednesday might have been too low, and many in the anxious crowds said they believed the number was much higher. "Putin: at least 800 people are being held hostage," read a sign held up for television cameras.

Dzugayev said contacts with the militants were suspended at their request early Friday morning, Interfax reported, in what was apparently a temporary break.

Relatives, friends and neighbors who crowded outside barricades blocking access to the school gasped when the hostage release was announced by Dzugayev, an aide to the president of North Ossetia.

Dzugayev and other officials said 26 women and children of various ages were released, but Russian media reported that one woman went back to be with her still-captive children. An official at the crisis headquarters said another group of five hostages was let go separately.

An Associated Press Television News reporter saw two women and at least three infants being led away by soldiers. Some toddlers among those released were completely naked, apparently because of the heat.

Dzugayev called the releases "the first success" of negotiations and said they came after mediation -- including inside the school -- by Ruslan Aushev, a former president of the Ingushetia republic who is a respected figure in the northern Caucasus.

The hostage release came after anxieties were sent soaring by two powerful explosions, followed by a plume of black smoke rising from the vicinity of the school. The crisis headquarters said the militants fired grenades at two cars that apparently drove too close to the building. Officials said neither car was hit, but a gutted car was visible not far from the school.

Thursday evening, a series of heavy thuds that sounded like artillery could be heard for several minutes, apparently coming from an area northwest of town. There was no information on what caused the sounds.

Two grenade blasts were heard early Friday, and the Interfax news agency reported a policeman was injured. One projectile exploded on a street several hundred yards from the school and another hit in a yard, witnesses said. Dzugayev said that the hostage-takers told Russian authorities they fired because they saw suspicious movement and that officials told them there was no such movement.

Any hint of violence put people on edge. After seizing the school, the militants reportedly threatened to blow it up if troops tried to rescue the hostages and warned they would kill prisoners if any of their gang was hurt. Authorities estimated 15 to 24 militants held the school.

In his first public comments on the crisis, Putin pledged to do everything possible to rescue the hostages.

"Our main task is, of course, to save the lives and health of those who became hostages," Putin said in televised comments during a meeting at the Kremlin with visiting Jordanian King Abdullah II. "All actions of our forces working on the hostages' release will be devoted and be subject to this task exclusively."

Two major hostage-taking raids by Chechen rebels outside the war-torn region in the past decade prompted forceful Russian rescue operations that led to many deaths. The most recent, the seizure of a Moscow theater in 2002, ended after a knockout gas was pumped into the building, debilitating the captors but causing almost all of the 129 hostage deaths.

Valery Andreyev, the Federal Security Service's chief in North Ossetia, seemed to rule out the use of force against the hostage-takers.

"There is no alternative to dialogue," he told the ITAR-Tass news agency. "One should expect long and tense negotiations."

The presence of large numbers of children added to the risks of any attempt to storm the school -- and fueled anger at the attackers.

"Send them off to a deserted island and shoot them," said Lydia Drachova, 66, sitting beneath a decrepit statue of Lenin. "They're taking children. Like beasts!"

After negotiations that ran through the night and into Thursday, Alan Doyev, a spokesman for the North Ossetia Interior Ministry, said that "so far we have not heard the terrorists' clearly formulated demands."

The militants' identity was also murky.

Dzugayev said the attackers might be from Chechnya or Ingushetia. Law enforcement sources in North Ossetia and Ingushetia, speaking on condition of anonymity, said the attackers were believed to include Chechens, Ingush, Russians and a North Ossetian suspected of participating in the Ingushetia violence.

Russia was on edge following the nearly simultaneous bombings on two jetliners last week, a bombing in Moscow on Tuesday and the school siege.

The upsurge in violence has been a blow to Putin, who pledged five years ago to crush Chechnya's rebels but instead has seen the insurgents increasingly strike civilian targets beyond the republic's borders.

"We understand these acts are not only against private citizens of Russia but against Russia as a whole," Putin said. "What is happening in North Ossetia is horrible ... not only because some hostages are children but because this action can explode the already fragile balance of interconfessional and interethnic relations in the region."