Three days of mourning have begun after Taliban gunmen killed 132 children and nine teachers at a school in Peshawar.

The country suffered its deadliest terror attack as nine men stormed the army-run school while around 500 children and teachers were believed to be inside.

Tehreek-e-Taliban insurgents moved from room to room during the eight hour attack in what is believed to have been an act of revenge for a major military offensive in the region.

Funerals of many of the victims have already taken place with the rest to follow later.

The Pakistani Prime Minister has lifted a ban on the death penalty in terrorism cases after Taliban gunmen killed 132 children and nine teachers at a school in Peshawar.

Prime Minister Nawaz Sharif described the attack as a "national tragedy unleashed by savages".

"These were my children. This is my loss. This is the nation's loss."

Teenage survivor Shahrukh Khan, who ducked below his desk with classmates when four gunmen burst into their room, described how he played dead after being shot in both legs, stuffing his tie into his mouth to stifle his screams.

"I saw a pair of big black boots coming towards me, this guy was probably hunting for students hiding beneath the benches," the 15-year-old said.

"The man with big boots kept on looking for students and pumping bullets into their bodies. I lay as still as I could and closed my eyes, waiting to get shot again.

"My body was shivering. I saw death so close and I will never forget the black boots approaching me - I felt as though it was death that was approaching me."

Chief military spokesman General Asim Bajwa that 125 people had been wounded in the assault.

Gen Bajwa said the attackers, equipped with enough ammunition and food to last for a number of days, only wanted to kill.

"The terrorists started indiscriminate firing as they entered the auditorium so they had no intention of taking any hostages," he said.