There were scenes of grief at the site of the Martin Place siege, as mourners hugged and consoled each other in front of hundreds of floral tributes to the hostages who lost their lives.

Groups of people hugged and cried as they gathered at the site where Lindt cafe manager Tori Johnson and barrister Katrina Dawson died following the 17-hour siege.

The PM visited the scene this afternoon among hundreds of mourners. (9NEWS)

Hundreds have laid flowers at the scene, including Prime Minister Tony Abbott, Police Commissioner Andrew Scipione, NSW Premier Mike Baird and Australia's most senior Muslim cleric, the Grand Mufti Dr Ibrahim Abu Mohammed.

Mr Abbott visited the memorial and signed the condolence book with his wife Margaret.

Aerial photos of the flowers at the memorial. (9NEWS)

In a press conference this evening, Mr Abbott described the hostages as "decent" people going about their ordinary lives.

He said the nation had been thoroughly impressed with the police operation and thanked Sydney for its response to the tragedy.

"Every Sydneysider can feel quietly proud of the way this city has handled one of the most difficult 36 hours in our history," he said.

"Australia will always be a free and open and generous society."

It is believed some were friends of the victims. (9NEWS)

Cafe manager Tori Johnson was one of the people killed in the siege. Supplied)

The Homicide Squad will investigate the three deaths after the siege, which will be treated as a critical incident.

Johnson's parents Ken and Rosemary have remembered him as "their beautiful boy" in a statement released via radio host Ben Fordham.

"We are so proud of our beautiful boy Tori, gone from this earth but forever in our memories as the most amazing life partner, son and brother we could ever wish for," the statement read.

"We'd like to thank not only our friends and loved ones for their support, but the people of Sydney; Australia and those around the world for reaching out with their thoughts and prayers."

Barrister Katrina Dawson. (Supplied)

The couple also offered their "heartfelt sorrow for the family of Katrina Dawson".

Dawson, 38, died of a heart attack on the way to hospital after police stormed the cafe about 2am.

Four of the hostages were staff members from the nearby Westpac bank who had dropped into the cafe for their morning coffee.

Sheik Man Haron Monis has been named as the gunman. (AAP) (AAP)

Night falls over Martin Place, as a captor holds hostages at gunpoint. (9NEWS)

Fordham called into 2GB this morning to tell listeners the Johnson family had requested he read out the statement on air. He said he was a "mate of a mate" of Dawson's father.

Read the full statement released by Tori Johnson's family here .

Five of the hostages were taken to hospital for treatment to injuries suffered during the gunfight.

- A 75-year-old woman suffered a gunshot wound to the shoulder and is now in a stable condition.

- A 52-year-old woman suffered a gunshot wound to the foot and is now in a stable condition.

- A 43-year-old woman suffered a gunshot wound to the leg and is in a stable condition.

- Two pregnant women, aged 35 and 30 respectively, were assessed for "health and welfare purposes" and are now in a stable condition.

- A 39-year-old police officer, believed to be a sergeant, suffered minor facial injures from shotgun pellets. He was treated at hospital and discharged.

Police Commissioner Andrew Scipione said police stormed the cafe after hearing "a number of gunshots from inside".

"To the people of Sydney, this was an isolated incident… it was an act of an individual and should not change how we go about our business," Commissioner Scipione told reporters this morning.

He praised the hostages for their courage during the ordeal.

Sheik Man Haron Monis during one of his recent court appearances. (AAP) (AAP)

"They were just buying a cup of coffee and got caught up in this affair... they were caught up in this room and needed to make hard decisions," he said.

He also confirmed no explosives were found inside the building, despite some earlier reports.

Two escapees from the Lindt cafe were reportedly shaken by the ordeal. (Nine)

Dawson was a well respected lawyer who worked for a firm on Phillip Street and had dropped into the cafe to grab a coffee before starting work yesterday.

The NSW Bar Association has paid tribute to Dawson.

"Katrina was one of our best and brightest barristers who will be greatly missed by her colleagues and friends of the NSW Bar," association president Jane Needham SC said in a statement.

"She was a devoted mother of three children and a valued member of her floor and of our community."

She also topped her bar exams and is the sister of well-known media barrister Sandy Dawson.

IN PICTURES: Hostages escape from Sydney siege cafe View Gallery

Johnson had worked at the Lindt Cafe for more than two years and had reportedly worked in the service industry in the US and Australia.

The dramatic events of early this morning brought to a head a siege which had paralysed the city from 10am yesterday morning when the self-styled Muslim cleric Monis took the group of 17 people hostage.

He first came to the attention of police when he penned letters to the families of dead Australian soldiers seven years ago. He had also been charged with more than 50 allegations of indecent and sexual assault, reported to have occurred while he operated as "spiritual healer".

The PM and his wife signed the condolences book. (9NEWS)

On Friday, his latest appeal in relation to the sending of letters to deceased Australia soldiers was dismissed by the High Court.

Monis escaped jail time over the incident was sentenced to 300 hours of community service and placed on a two-year good behaviour bond in September 2013.

He had been quiet for nine hours in the lead up to the storming of the building when a man sprinted from the cafe with his hands raised.

After dropping to the ground he was frisked by police and taken away.

Another group of five then ran out the door to safety.

A bang from inside the building was heard and was quickly followed by a second loud report when a seventh hostage ran into the arms of police.

Police opened the door and used live ammunition and several stun grenades.

The seventh hostage was then ushered away before more gunfire erupted.

NSW Premier Mike Baird has called for calm following the incident.

"In the past 24 hours, this city has been shaken by a tragedy we'd never thought possible – we are a peaceful and harmonious society which is the envy of the world," he said this morning.

"We must go about our useful business, we must work, we must talk to our family, we must talk to our friends.

A hostage is seen going to the front door of the Lindt cafe to switch off the lights. (Getty)

"But we must come together… we are stronger together and we will get through this."

It is believed 11 people escaped or were rescued, after five escaped yesterday afternoon.

"What ISIL has done recently is actually claim credit for a number of these lone actor attacks even if there is no intelligence, let alone evidence, to indicate that it had a connection to these individuals," security expert Neil Fergus, who is the chief executive of Intelligent Risks, said.

"It has even claimed responsibility on the internet for the attack in Melbourne involving the stabbing of two police officers and the death of the perpetrator."

"So it will again try to use this type of tragic event to [spread] its message.

One of the first hostages to escape raises his hands as he approaches armed police. (Getty)

"They will try to claim it is one of their terrorist events and the reality is that we've got a very disturbed criminal individual who has carried out this attack with some very murky political agenda but it will now go into the litany of these lone wolf attacks that seem to have been occurring around the globe in recent months."

Police said their operation had now concluded but the matter would now be handed to the Professional Standards Command, which handle all police shootings. Forensic officers remain at the scene and it is understood Monis' body has not been removed from the building.

Heavily armed police are also still at the scene and a bomb detection robot was earlier seen entering the building.

The families of those being held captive had gathered at a nearby St James building earlier in the evening.

After the gunfire erupted, they paced the stairs at the front of the building, as police tried to usher them inside.

Prime Minister Tony Abbott and his wife Margaret pay their respects. (9NEWS)

Throughout the night, hostages had been huddled in the cafe in the darkness.

The gunman had earlier rotated the hostages for around two hours at a time for stints pressed against the glass windows of the shop.

The gunman was reportedly "extremely agitated" after the escape of five hostages yesterday afternoon and was seen shouting at the remaining hostages.

One of the hostages to flee the siege was Lindt cafe worker Elly Chen, whose escape, caught by cameramen gathered at the distant barricades, evoked an outpouring of relief from friends on her Facebook page.

Sydney Siege: Timeline of events View Gallery

A male escapee was taken to St Vincents Hospital to be treated for shock and a pre-existing heart condition and was in a satisfactory condition.

Social media had been employed by the gunman, with reports hostages have been directed to relay his demands via Facebook accounts and to contact media outlets, however police had urged the gunman to speak directly to negotiators.

The shocking siege turned Martin Place and surrounding streets - Sydney's government, legal and financial heart - into a ghost town with roads empty of pedestrians and travelled only by speeding police and emergency vehicles with lights flashing.

Office workers were evacuated from buildings during the day via ladders, out of windows and down fire escapes.

Earlier, two hostages had contacted 9NEWS with demands from the gunman.

The view from the air of the Martin Place memorial. (9NEWS)

9NEWS reporter Mark Burrows says it was "upsetting in the extreme" to speak with two hostages, both women, inside the cafe this afternoon, who both contacted the station's newsroom at the demand of the gunman.

Burrows said he could hear the gunman in the background "clearly ... outlining his demands", which 9NEWS refused to air in cooperation with authorities.

Burrows said the first woman "sounded remarkably calm as she detailed (the gunman's) demands".

She asked Burrows to pass on a message to her husband, who also remarked that his wife was "always so cool in a crisis".

The second woman Burrows spoke to was "agitated" that nothing seemed to be happening, the journalist said.

"She also relayed more of his demands but he (the gunman) would not come to the phone," Burrows said.

"It was upsetting in the extreme to hear these women talking ... women who should be at home with their families ... who are now plunged into a deadly situation."

The alarm was raised about 9.45am after onlookers reported a man with a shotgun taking hostages in the cafe.

In the first hours of the siege, hostages were forced to hold what appeared to be an Islamic flag, identified as a Shahada flag, in the cafe window reading: "There is no god worthy of worship except Allah and Muhammad is his messenger."

The flag is used by the group Jabhat al-Nusra - which preaches jihad and has links to terror groups ISIS and Al Qaeda.

Mr Abbott condemned the act but shied away from labelling it terrorism.

"He (the offender) sought to cloak his action in the symbolise of the ISIL death cult," he said.

"These events do demonstrate that any country as free, as open, generous and safe as ours is vulnerable to acts of politically motivated violence.

There were emotional scenes at Martin Place as hundreds paid their respects to those who died. (9NEWS)

"But we are ready to deal with these people, professionally and with the full force of the law."

Australia's national terror alert level was lifted to high in September just before two people were charged in raids in Sydney amid reports there was a plot to behead a member of the public in Martin Place.