On the night of 1 July 2016, at 21:20 Bangladesh Standard Time (UTC+06:00), five Islamic State (IS) terrorists took hostages and opened fire on the Holey Artisan Bakery in Gulshan Thana jurisdiction in Dhaka, Bangladesh. The militants entered the bakery with crude bombs, machetes, pistols, and took several dozen hostages, including foreign nationals as well. In the immediate response, while Dhaka Metropolitan Police tried to regain control of the bakery, two police officers were shot dead by the assailants.

By the end of the security forces' operation, 29 people were killed, including 20 hostages (17 foreigners and 3 Bangladeshis), two police officers, five terrorists, and two bakery staff. After the police failed to breach the bakery and secure the hostages, they set up a perimeter along with the Rapid Action Battalion and Border Guard Bangladesh. Very early on 2 July (around 03:00), it was decided that the Bangladesh Armed Forces would launch a counter-assault named Operation Thunderbolt. The assault was led by the 1st Para-commando Battalion, an elite force in the Bangladesh Army under the leadership of operational commander Brigadier General Mujibur Rahman, and began at 07:40. According to Bangladesh's Inspector General of Police, all of the attackers were Bangladeshi citizens. IS claimed responsibility for the incident and released photographs of the gunmen, but then- Home Minister Asaduzzaman Khan stated that the perpetrators belonged to Jamaat-ul-Mujahideen and were not affiliated with IS.

The incident was described by BBC News as the "deadliest Islamist attack in Bangladeshi history." The local media referred to it as the 7/16 attack.

The Constitution of Bangladesh declares secularism as one of the four fundamental principles of the country but also recognises Islam as the state religion. Around 91% of Bangladeshis are Muslims, with the rest being Hindus, Buddhists, Christians and others.

The militant Islamic organisation Jamaat-ul-Mujahideen was founded in 1998 and outlawed in 2005 when it committed a series of bombings, but later took up activities again. Bangladesh government later tried and hanged Shaykh Abdur Rahman and Siddiqur Rahman, two leaders of the organisation.

Some attacks came from another Islamic terrorist group outlawed in 2005 named Harkat-ul-Jihad al-Islami, including the 2004 Dhaka grenade attack and 2001 Ramna Batamul bombings. Mufti Hannan, the leader of the terrorist group was sentenced to death on 23 December 2008.

Since 2013, Muslim-majority Bangladesh has experienced an increase in Islamist attacks on religious minorities, secularist and atheist writers and bloggers, LGBT rights activists and liberal-minded Muslims. Since September 2015, there have been over 30 such attacks, and Islamic State of Iraq and the Levant claimed responsibility for 21 of them. Ansarullah Bangla Team, another terrorist group outlawed on 25 May 2015, also claimed responsibility for some of them.

In November 2015, the IS magazine Dabiq published an article calling for the "revival of jihad in Bengal".