Farkhat Agamaliev said by phone that the Azeri authorities were negotiating with the rebel unit, which had earlier taken the republic's public prosecutor hostage to demand the release of colleagues jailed on suspicion of murder.
Agamaliev said troops loyal to Aliyev had surrounded the headquarters of the OPON riot police and were attempting to persuade policemen inside to give up their arms.
"Now there are peaceful negotiations between officials and policemen," Agamaliev said. He added that troops were patrolling the streets in Baku and that there had been no further incidents.
Reuters reported about 700 government soldiers with at least 15 T-72 tanks were deployed around a compound in Baku where the force of about 150 OPON police is based.
Aliyev declared Monday a 60-day state of emergency after about 100 policemen from OPON, headed by Deputy Interior Minister Rovshan Dzhavadov, stormed the Public Prosecutor's Office in central Baku on Sunday and took hostage Public Prosecutor Ali Omarov.
Agamaliev said Omarov had been beaten up severely and was still in hospital Tuesday.
According to the Azeri constitution, the president has the right to impose a state of emergency for a period of 60 days without parliament's approval, Agamaliev said.
The OPON attack on the Public Prosecutor's Office followed the arrest at the weekend of three policemen on suspicion of involvement in the murder of two high-ranking Azeri officials.
Afiyaddin Dzhalilov, deputy speaker of the Supreme Soviet, and Shamsi Ragimov, head of the president's security department, were murdered last Thursday. Both were close allies of President Aliyev.
The OPON troops freed their hostage Monday and left the office for their headquarters, where they barricaded themselves in.
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