> EXTENDED COVERAGE

NSW Police have confirmed that three people have now emerged from the location in Martin Place. Several people were captured on live television streams coming out of a door near Lindt cafe. MORE TO COME. Police have warned people to stay clear of Martin Place in Sydney's CBD as a siege continues in a local cafe.

Around 10am this morning, customers and workers were believed to have been taken hostage inside the Lindt Chocolat Cafe.

People could be seen pressed up against the windows of the Lindt Chocolat cafe. There are reports up to a dozen people could be inside.

A black flag with white Arabic writing on it was held up in the window. The flag is translated as "there is no God but God and Mohammed is the messenger of the God". The flag is an Islamic flag but is not linked to the ISIL militant group.

NSW police said "specialist officers" are trying to contact those inside.

"Police are dealing with an armed incident and specialist officers are attempting to make contact those inside a café," a statement read.

"Some nearby offices have been evacuated as a precaution."

"Police urge members of the public to remain calm and note that an appropriate police presence is in place."

Martin Place shut down

Martin Place was shut down and scores of police flooded the area after the alarm was raised this morning.

Workers in nearby buildings, including the Seven Network, were ordered to evacuate the area, while those who were trapped in buildings inside the police cordon were told to stay away from windows.

Police have closed off Martin Place between Macquarie and Elizabeth Streets with Martin Place train station shut down.

There are about 200 bystanders between Martin Place and Castlereagh Street watching anxiously.

Martin Place has several prominent buildings, including Premier Mike Baird's office, the Reserve Bank of Australia, Westpac Bank and the Commonwealth Bank headquarters as well as the US embassy and Network Seven.

The Supreme Court, Sydney Hospital and NSW parliament are also nearby.

Justin Doyle, who was outside the cordon, spoke to his to co-workers in a legal office inside the area.

"They are obviously all very scared. Police have told them to stay where they are and do as they're told," he told AAP.

The federal government has denied reports the airspace over the Sydney CBD had been shut down.

"There are choppers in the air and air traffic is being rerouted according. At this stage no impact on the air traffic network," a spokesman for Deputy Prime Minister Warren Truss said.

'Deeply concerning' incident: Abbott

Prime Minister Tony Abbott said the issue was "deeply concerning" and confirmed he convened a security meeting. Mr Abbott said he has spoken with NSW Premier Mike Baird and offered him all possible Commonwealth support and assistance. "This is obviously a deeply concerning incident but all Australians should be reassured that our law enforcement and security agencies are well trained and equipped and are responding in a thorough and professional manner," he said. "We will provide regular updates as further information becomes available." NSW Premier Mike Baird said he has "full confidence" that NSW police will be able to resolve the situation. "All my thoughts and prayers are with those members of the public affected by the situation in Martin Place and the NSW Police who are trained to deal with these events," NSW Premier Mike Baird said. > EXTENDED COVERAGE

Witness descibes moments before siege

Journalist Chris Kenny, who was in the shop about 20 minutes before the siege began, said he understood the automatic glass sliding doors had been disabled.

"I did speak to a couple of people who saw a bit more of this unfold than I did," he said.

"One woman said she tried to go into the shop just after I came ut with my takeaway coffee but the doors wouldn't open.

"She said immediately she could see there was a weapon.

"She mentioned it being taken out of a blue bag and people were straight away asked to put up their hands."

Martin Place in lock down. Not permitted to leave our building pic.twitter.com/Jw3blZNefd — Chris Horne (@crackergo) December 14, 2014

NOW: Heavily armed police seen near café in Martin Place, #Sydney, amid hostage situation pic.twitter.com/1Z0M6i7tpM — αηιs (@H0XH4) December 14, 2014

Man holding hostages in Lindt cafe on Martin Place - can see hostage arms against windows pic.twitter.com/OHHQUGXSvo — Christos (@ChristosAU) December 14, 2014