The attack took place in a church, the Notre Dame Basilica, on Thursday. The victims include one woman who was "decapitated" inside the church, Mayor Christian Estrosi said.
Estrosi said the attacker was shot by police, but is still alive and has been taken into custody.
"I am on the scene with the police who arrested the attacker. Everything points to a terrorist attack," Estrosi said on Twitter Thursday morning.
"At this moment, we have, without any doubt, two dead inside the church, in a horrible way," Estrosi said shortly afterwards during a press conference.
France's Interior Minister Gérald Darmanin said he was chairing a crisis meeting at the ministry in response to the attack.
President Emmanuel Macron will travel to Nice after attending that meeting, the Elysee Palace said.
France's anti-terror prosecutor has taken on the investigation into the attack, a spokesperson for the prosecutor's office said.
"It seems that, according to the first findings of the police, the woman who was inside the church has been decapitated. For the other victims, we cannot say anything at the moment," Estrosi told French news channel BFMTV.
Nice has been the target of terror in the past. In 2016 dozens died after an ISIS-inspired attacker plowed a 20-ton truck into Bastille Day crowds.
Eric Ciotti, a French lawmaker who represents the city of Nice and surrounding area in the National Assembly, said the whole of France was in mourning on Thursday.
"Like a symbol, the Notre Dame basilica is still ringing. It is our country and its history that are hit today in Nice," he said on Twitter, in a post that shared a video of church bells. Ciotti added: "Islamist barbarism will never silence us!"
The French Council of the Muslim Faith strongly denounced the incident and called on French Muslims to cancel Thursday's Mawlid celebrations.
Mawlid is celebrated by some Muslims to mark the birthday of Islam's Prophet Mohammed.
"I strongly condemn the terrorist attack that took place near the Notre-Dame Basilica in Nice. As a sign of mourning and solidarity with the victims and their families, I call on the Muslims of France to cancel all the Mawlid festivities," the council stated in a post on its Twitter account.
International condemnation
Politicians, officials and organizations across Europe have condemned the Nice attack.
The President of the European Parliament, David Sassoli, said he was deeply saddened by the incident. "This pain is felt by all of us in Europe," he said on Twitter.
"We have a duty to stand together against violence and those that seek to incite and spread hatred."
Spanish Prime Minister Pedro Sanchez offered his "deep sympathy and solidarity" to those affected.
"We will keep defending freedom, our democratic values, peace and security of our citizen. United in face of terror and hatred," he said on Twitter.
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