It is not known if he is armed or if anyone has been hurt.
The service was being streamed live when the incident started. The feed has since been taken down, but not before an angry man could be heard saying he did not want anyone to be hurt.
Police deployed special weapons teams and local people were evacuated.
At least four hostages - including the rabbi - are believed to be inside the synagogue, two law enforcement officials told The Associated Press on condition of anonymity.
President Joe Biden "has been briefed about the developing hostage situation in the Dallas area", White House Press Secretary Jen Psaki said on Twitter.
The police department in Colleyville said in a tweet at 11:30 (16:30 GMT) that it was "conducting SWAT operations" at the address of the Congregation Beth Israel.
Two hours later the department said the situation remained "ongoing".
"We ask that you continue to avoid the area. We will continue to provide updates via social media," it said.
A live stream of the Shabbat morning service on Facebook captured audio of a man talking loudly.
He could be heard saying, "You get my sister on the phone" and "I am gonna die".
He was also heard saying: "There's something wrong with America."
Barry Klompus, a member of the congregation since it opened in 1999, said he had been told about the incident by another member and had quickly turned to the live feed until it was pulled.
"It was horrible listening and watching, and it's that much more horrible not knowing," Mr Klompus told Reuters news agency.