"According to the initial findings of the inquiry, one or several individuals on board a vehicle drove into the factory that produces industrial gas. An explosion then took place," said one of the sources.
The suspected attacker, aged 30, has been arrested after a decapitated body was found nearby the factory in the city of Saint-Quentin-Fallavier.
"The decapitated body of a person was found nearby the factory but we do not yet know whether the body was transported to the place or not," added this source, adding that a "flag with Arabic writing on it was found on the scene."
Interior Minister Bernard Cazeneuve said he would go "immediately" to the scene, his office said.
The attack comes nearly six months after the Islamist attacks in and around Paris that killed 17 people in January that started with a shooting at satirical magazine Charlie Hebdo.
Two Islamist brothers attacked the satirical magazine, killing 12. A policewoman and four hostages in a Jewish supermarket were also killed during the three-day attacks.