Officers responded to a report of shots fired in the 1000 block of Capitol Street at around 3 p.m.
Responding officers were told that the suspect, 26-year-old Sy Camphor, had fired a handgun outside his home and gone back indoors.
The situation intensified after officers surrounded the house and learned that Camphor was keeping two female hostages inside, police said.
Nearby residents were evacuated, and an emergency services unit was summoned, which consisted of Vallejo and Benicia police SWAT teams, hostage negotiators and tactical dispatchers.
Negotiators spoke with Camphor for four hours, during which time one of the hostages managed to escape, police said. Camphor allegedly refused to surrender, and at about 7 p.m. the SWAT team entered the house by force.
The second hostage was rescued in the raid and no injuries were reported, police said.
Camphor was arrested on two counts of false imprisonment and for being a convicted felon in possession of a firearm. Officers found two rifles and a handgun during a search of the suspect's home, police said.
Anyone with information to the investigation is asked to contact Vallejo police Detective Wentz at (707) 648-4379.