A man who allegedly threatened to kill police officers in Sydney while armed with a knife and become a martyr has been charged with terrorism offences, police say.

Uniformed officers were approached at the intersection of Devonshire and Elizabeth streets in Surry Hills early in the morning on June 14 last year by a man who allegedly had a knife and was allegedly making verbal threats towards them.

Police will allege the man, 26-year-old Blake Nicolas Pender, was "muttering in a foreign language" and made numerous threats during his arrest about wanting to become a martyr and kill police.

Mr Pender was charged with being armed with intent to assault police and steal from persons, both of which are currently before the court.

Following further investigations by the Fixated Persons Investigation Unit, Mr Pender has been charged with possess a thing connected with a terrorist act and preparation or planning a terrorist act.

During a press conference to announce the charges, Assistant Commissioner Counter Terrorism and Special Tactics Command Mick Willing would not outline why the incident crossed "the line" to become a terrorism offense.

"The line will be illustrated in the brief of evidence before the court," he said.

"The evidence that we have gathered, we say, goes towards the motive that this individual displayed and showed, had, I must say in terms of intent of the day.

"Some of these offences hold up to 25 years or life. These are serious charges."

Assistant Commissioner Willing said Mr Pender was known to the Fixated Persons Investigation Unit prior to the attack.

"I want to reiterate this is not a new threat and we encourage people to go about their daily lives but be alert," he said.

The Fixated Persons Investigation Unit — established in April last year — investigates people driven by extreme political, religious or ideological beliefs who make threats of violence, and also works to identify people who may be vulnerable to radicalisation or lone-wolf-style attacks.

This is the first time the unit has laid terrorism charges.

Mr Pender remains in custody and will appear in Central Local Court on February 8.