According to initial reports, police surprised the robbers in the early hours of the morning and engaged them in a shootout.
The violence erupted on Friday in the city of Milagres in the northeastern state of Ceara with a fierce pre-dawn shoot-out between the armed robbers and the police.
Local media reported that five of the dead hostages were from the same family, including two children aged 14 and 13.
"The criminals killed the hostages and the police killed the criminals", he added.
Ceara had the third highest number of violent deaths in Brazil, according to Brazilian website O Povo, with 2,360 casualties-or a rate of 26 deaths per 100,000 inhabitants-registered in the first half of 2018.
Two suspects were apprehended, according to police. "We are working to identify the victims", Kelia Jacome, spokeswoman for the governor said by telephone.
They were reportedly travelling to the nearby airport when the gang took them hostage while making their escape. Authorities also seized three vehicles, several firearms and explosives.
Robbers at one bank took several people hostage when police surrounded the area, according to a police statement.
Forensic experts carry a corpse to be transported to the morgue after an attempted bank robbery in Milagres, in Ceara state, Brazil, on November 7. "I heard people yelling and crying".
Brazil is one of the most violent countries in the world, suffering almost 64,000 murders past year - a homicide rate of 30.8 per 100,000 inhabitants that is three times higher than the level the United Nations considers to be endemic violence.
On January 1, a far-right politician promising a relentless crackdown on crime, Jair Bolsonaro, will become Brazil's new president following his election in October.