MIDLAND CITY, Ala. -- A gunman holed up in a bunker with a 6-year-old hostage kept law officers at bay Wednesday in an all-night, all-day standoff that began when he killed a school bus driver and dragged the boy away, authorities said.

SWAT teams took up positions around the gunman's rural property and police negotiators tried to win the kindergartener's safe release.

Sheriff Wally Olson said in a brief statement Wednesday evening that negotiators continued talking to the suspect and "at this time we have no reason to believe that the child has been harmed."

The gunman, identified by neighbours as Jimmy Lee Dykes, a 65-year-old retired truck driver, was known around the neighbourhood as a menacing figure who once beat a dog to death with a lead pipe, threatened to shoot children for setting foot on his property and patrolled his yard at night with a flashlight and a shotgun.

He had been scheduled to appear in court Wednesday morning to answer charges he shot at his neighbours in a dispute last month over a speed bump.

The standoff along a red dirt road began on Tuesday afternoon, after a gunman boarded a stopped school bus filled with children in the town of Midland City, population 2,300. The sheriff said the man shot the bus driver when he refused to hand over a 6-year-old child. The gunman then took the boy away.

"As far as we know there is no relation at all. He just wanted a child for a hostage situation," said Michael Senn, a pastor who helped comfort the traumatized children after the attack.

Authorities gave no details on the standoff, and it was unclear if Dykes made any demands from his underground bunker, which resembled a tornado shelter.

About 50 vehicles from federal, state and local agencies were clustered at the end of a dirt road near where Dykes lived in a small travel trailer. Nearby homes were evacuated after authorities found what was believed to be a bomb on his property.

State Rep. Steve Clouse, who met with authorities and visited the boy's family, said the bunker had food and electricity, and the youngster was watching TV. He said law enforcement authorities were communicating with the gunman, but he had no details on how.

At one point, authorities lowered medicine into the bunker for the boy after his captor agreed to it, Clouse said. The lawmaker said he did not know what the medicine was for or whether it was urgently needed.

The crisis in Alabama played out while lawmakers in Washington held congressional hearings to address gun violence -- part of an ongoing national discourse that has ramped up since the December massacre of 20 young children and six adults at Connecticut elementary school.

Former Rep. Gabrielle Giffords, who was shot in the head during a shooting rampage in Arizona in January 2011, was testifying in favour of stricter gun controls.

The bus driver in Alabama, Charles Albert Poland Jr., 66, was hailed by locals as a hero who gave his life to protect 21 students.

Chris Voss, a former international kidnapping negotiator for the FBI, said negotiators at the scene should remain patient and calm, resisting the urge to force a quick resolution.

"Getting what you want is not the same as getting even," said Voss, whose firm, the Black Swan Group, now consults on high-stakes negotiations. "Flooding the zone will not save lives."

Mike and Patricia Smith, who live across the street from Dykes and whose two children were on the bus when the shooting happened, said their youngsters had a run-in with him about 10 months ago.

"My bulldogs got loose and went over there," Patricia Smith said. "The children went to get them. He threatened to shoot them if they came back."

Patricia Smith said her children told her what happened on the bus: Two other children had just been dropped off and the Smith children were next. Dykes stepped onto the bus and grabbed the door so the driver couldn't close it. Dykes told the driver he wanted two boys, 6 to 8 years old, without saying why.

According to Smith, Dykes started down the aisle of the bus and the driver put his arm out to block him. Dykes fired four shots at Poland with a handgun, Smith said.

"He did give his life, saving children," Mike Smith said.

Patricia Smith said her daughter, a high school senior, began corralling the other children and headed for the back of the bus while Dykes and the driver were arguing. Later, Smith's son ran inside his house, telling his mother: "The crazy man across the street shot the bus driver and Mr. Poland won't wake up."

Patricia Smith ran over to the bus and saw the driver slumped over in his seat. Her daughter used another child's cellphone to call police.

Another neighbour, Ronda Wilbur, said Dykes beat her dog with a lead pipe for coming onto his side of the dirt road. The dog died a week later.

"He said his only regret was he didn't beat him to death all the way," Wilbur said. She called animal control, who came out and talked to Dykes, but nothing else happened.

Dykes had been scheduled to appear in court Wednesday to face a charge of menacing some neighbours as they drove by his house weeks ago. Claudia Davis said he yelled and fired shots at her, her son and her baby grandson over damage Dykes claimed their pickup truck did to a makeshift speed bump in the dirt road. No one was hurt.