The attacker survived the blast and was arrested. The identity of the beheaded victim was not clear but a police source said it was a manager of a transport company, on the site for a delivery. It was not yet clear whether his vehicle was then used by the attacker to gain entrance.
Speaking from a European Union summit in Brussels, French President Francois Hollande described it as a terrorist attack and said all measures would be taken to stop any future strikes on a country still reeling from Islamist assaults in January.
Interior Minister Bernard Cazeneuve said one suspect, named as Yassin Sahli, had been arrested, and police were holding other suspected accomplices. He said Sahli did not have a criminal record but had been under surveillance from 2006 to 2008 on suspicion of having become radicalised by Islamists.
"A person was killed and decapitated and the anti-terrorist section of the Paris prosecutor has been immediately deployed," Cazeneuve said at the scene of the attack in an industrial zone by the town of Saint-Quentin Fallavier, 30 km (20 miles) southeast of Lyon.
French media said Sahli was a 35-year-old professional driver who lived in the Lyon suburbs. There was no official confirmation of that but Europe 1 radio interviewed a woman they identified as his wife.

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