Michel Cadot, the head of the French capital's police force said the man was carrying a machete and shouted "Allahu akbar" - Arabic for "God is great" - during the incident.
A patrol of four soldiers are reported to have tried to subdue the assailant using non-lethal force after he rushed at them.
The machete-wielding attacker was critically injured after he was shot by French soldiers.
The latest reports say no explosives were found in the man's two suitcases and the bomb squad was on the scene.
"Something is going down at The #Louvre 30 National Police vehicles with guns drawn", said one tweeter.
Paris police say a soldier opened fire outside the Louvre Museum after he was attacked by someone who was armed with a machete. No terrorist groups have yet claimed responsibility for the attack.
Prime Minister Bernard Cazeneuve said the attack appeared to be of a "terrorist nature".
While the attacker was not carrying any identity papers during the attack, investigators used his cell phone to determine his identity.
Paris Mayor Anne Hidalgo praised the actions of the soldiers, who are part of the "Sentinel Operation", an anti-terror security operation instituted after the 2015 terror attack on the satirical magazine Charlie Hebdo.
"I was in the open courtyard in front of the glass pyramid entrance", Byron Hood, 41, told NBC News. They were to be evacuated in small groups after the necessary security checks.
He added that about 1,000 people were inside the museum and were held in safe areas. He said that the situation is now "totally under control", but added that the threat to France remains. The attacker was taken to a hospital with serious injuries.
French officials have repeatedly dismissed security concerns over the Olympic bid despite the wave of attacks that have left more than 200 people dead in the country over the past two years.