Police are negotiating with a gunman who is holding a number of people inside a central Sydney cafe, hours after five hostages ran from the building.

The armed man, identified by police as Iranian cleric Man Haron Monis, entered the Lindt cafe in Martin Place at about 9.45am (AEDT) on Monday and has held an unknown number of staff and customers inside throughout the day.

Heavily armed police surrounded the building and evacuated shoppers and workers from the area as an exclusion zone was put in place.

Five hostages, including three Lindt staff members, emerged from a front and side door of the cafe several hours after the siege began but it is not clear if they escaped or were released.

New South Wales Deputy Police Commissioner Catherine Burn said police were in contact with Monis, whose identity was already known to them.

Key points: "Undisclosed number" of hostages inside the Lindt cafe in central Sydney, police say

"Undisclosed number" of hostages inside the Lindt cafe in central Sydney, police say The armed offender into the cafe has been identified as Iranian cleric Man Haron Monis

The armed offender into the cafe has been identified as Iranian cleric Man Haron Monis Almost seven hours into the siege, three people were seen running out of the cafe. An hour later another two emerged



Almost seven hours into the siege, three people were seen running out of the cafe. An hour later another two emerged New South Wales Deputy Commissioner Catherine Burn could not confirm how many people were being held hostage, but police believed it was fewer than 30

New South Wales Deputy Commissioner Catherine Burn could not confirm how many people were being held hostage, but police believed it was fewer than 30 Police are working to determine the motivation of the offender and have moved to a footing consistent with a terrorism event



Police are working to determine the motivation of the offender and have moved to a footing consistent with a terrorism event A black flag with white Arabic writing reading "There is no God but Allah" and "Mohammed is the messenger of God" was waved behind the hostages

A black flag with white Arabic writing reading "There is no God but Allah" and "Mohammed is the messenger of God" was waved behind the hostages Martin Place, Sydney Opera House, State Library and all CBD court houses evacuated

Martin Place, Sydney Opera House, State Library and all CBD court houses evacuated National Security Committee of Cabinet has convened; Prime Minister Tony Abbott described incident as "profoundly shocking" and offered NSW all assistance possible

National Security Committee of Cabinet has convened; Prime Minister Tony Abbott described incident as "profoundly shocking" and offered NSW all assistance possible Updates on road closures and public transport

"We have the best negotiators in the world and we are working through this methodically to make sure that nobody is injured," she said.

She said the five hostages who emerged from the cafe were being assessed to ensure they were in good health and were being spoken to by police.

Hostages were seen pressing a black flag displaying Arabic text against the cafe window soon after police were called to the busy pedestrian thoroughfare.

Just before 4:00pm, two men were seen running out a front door of the cafe, one with his arms in the air.

A man wearing a Lindt apron also ran from a side door that was surrounded by heavily armed police.

About an hour later, two female cafe workers were seen running from the building.

One, wearing an apron, ran into the arms of a police officer outside.

The ABC is among numerous media outlets to have been contacted by hostages at the hostage taker's request.

Police have asked media not to broadcast details about the phone calls.

Monis was seen wearing a backpack and bandana, and waving what appeared to be a gun, and directing hostages inside the cafe.

At one point, he appeared to use a hostage as a human shield as he moved through the building.

This evening, NSW Police Commissioner Andrew Scipione said the police focus was on getting the remaining hostages out safely.

"Our plan, our only goal tonight and for as long as this takes, is to get those people that are currently caught in that building, out of there safely," he said.

"That remains our number one priority and nothing will change."

Earlier, Deputy Commissioner Burn said she could not confirm how many people were being held hostage, but police believed it was fewer than 30.

NSW Health confirmed one of the hostages was in a satisfactory condition after being treated at St Vincent's Hospital.

Some mosques, synagogues and churches held prayer vigils in Sydney and other Australian cities this evening.

This morning, emergency crews used ladders to evacuate people, including a baby, from upper levels of the building.

Hundreds of officers, many of them heavily armed and wearing body armour, took up positions in the area and several surrounding blocks were cleared.

"It is profoundly shocking that innocent people should be held hostage by an armed person claiming political motivation," he said.

"Nevertheless, I can say that NSW Police and other agencies have responded to this incident with great professionalism.

"Yes, it has been a difficult day. Yes, it is a day which has tested us, but so far like Australians in all sorts of situations, we have risen to the challenge."

A woman runs towards police from the Lindt cafe. ( AFP: Saeed Khan )

Staff from the Seven Network have been allowed back into their Martin Place headquarters, after the building was earlier evacuated and taken over by tactical response police.

Reporter Chris Reason told 702 ABC Sydney that staff inside the Seven building had tried to count the number of people in the cafe, and estimated 15 people were taken hostage before five ran free this afternoon.

"There are older people, young, male, female, but fortunately no children," he said.

"I've seen plates of food delivered to hostages by Lindt staff.

"That's important, because it's showing some humanity."

He said Channel Seven staff saw Monis shouting at hostages after some of them ran out of the building.

Earlier, Seven producer Patrick Byrne said staff at the network watched the situation unfold before they were evacuated.

"We raced to the window and saw the shocking and chilling sight of people putting their hands up against the panes of glass at the cafe," he said.

"This was just extraordinary.

"Then, as we were looking wondering what was going on, it seemed to be like an armed hold-up, more police arrived at Martin Place.

"The area was cleared. People were kept back.

He said "gasps went through the newsroom" as the black flag was placed against one of the windows.

Hostages in the Lindt cafe in Sydney's Martin Place hold a flag in the window. ( The Morning Show )

A man at the scene told ABC News he saw a woman try to enter the cafe before she reported seeing a man inside with a gun.

"There was a bit of a kerfuffle and the next thing she said, there was a blue bag, and she said 'there's a gun in the bag', and then the commotion started.

"She told everyone to get going and we're running out of the building."

Martin Place worker Josh Acton said he was outside smoking when police suddenly ordered him inside a building, where about 80 people were taking cover.

"We're on tenterhooks," he said.

"We have grouped around people's computers to watch the news come in to see if there's any further updates.

A policeman near the scene of the siege at Martin Place. ( 702 ABC Sydney: John Donegan )

"They're all getting messages from loved ones to be safe, so it's creating a really scary atmosphere."

The White House confirmed that US president Barack Obama was briefed about the siege by his homeland security and counterterrorism chief.

The US Consulate in Sydney was evacuated this morning, and many shops, banks, cinemas, courts and businesses closed early.

Sorry, this video has expired A ladder is used to evacuate people, including a baby, from the building

Staff and tourists were evacuated from the Sydney Opera House at Circular Quay, about a kilometre away, and tonight's performances were cancelled.

Premier Mike Baird said police and the public were being "tested", but people should go about their business as normal.

Later, Mr Baird tweeted that he had spoken to "members of Sydney's valued Islamic community".

"Appreciated their support and reassured them we're in this together," he said.

Police urged members of the public to remain calm and avoid the area, and some transport services were cancelled.

An exclusion zone bordered by Hunter, Pitt, King and Phillip streets is in place.

Qantas diverted all flights around Sydney CBD, but flights were operating as scheduled and Sydney Airport said flights were operating normally.

Earlier, the Prime Minister issued a statement offering "all possible Commonwealth support and assistance" to the NSW Government.

Heavily armed police gather near the Lindt cafe in Martin Place. ( ABC News )

"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," Mr Abbott said.

Workers from nearby buildings at Martin Place, which were placed in lockdown, were told to evacuate to Hyde Park, where police had set up a safety site.

CBD cafe owner Chris Dion said people coming into his business were "terrified".

"We've got the TV on here. Everybody is coming in to have a look and see what's going on in Martin Place," he said.

"I'm in disbelief to be honest.

"We live in a beautiful country and this is happening right here in Sydney?"

People are evacuated from offices surrounding Martin Place. ( ABC News: Jenya Goloubeva )

Elleanor Gillard, who works in another part of the building, said police had told them to stay inside and away from the doors.

"We've just been notifying everyone on the floors above - I'm on the ground - not to come down in the lift because the lifts open up right in the foyer between us and Lindt [cafe]," she said.

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She said she saw a look of terror on the faces of two hostages who appeared to have been forced up against the glass.

"I'm just thinking about the guys in Lindt - the people we see everyday, go in and buy our coffee from them - and I'm sure they're terrified. It must be horrible for them."

In a statement posted on Facebook, Lindt Chocolate Cafe Australia expressed its concern and thanked the public for its support.

"Our thoughts and prayers are with the staff and customers involved and all their friends and families," the statement said.

The Grand Mufti of Australia, Professor Ibrahim Abu Mohamed, released a statement saying the Muslim community was "devastated" by the incident.

"The Grand Mufti and the Australian National Imam Council condemn this criminal act unequivocally and reiterate that such actions are denounced in part and in whole in Islam."

A heavily armed police officer runs across a road near the Lindt cafe. ( 702 ABC Sydney: John Donegan )

The president of the Lebanese Muslim Association, Samier Dandan, said Australian Muslim leaders were in talks to see if the community could help.

He said it was not known who was behind the siege and whether there were any links to the Australian Muslim community.

"Whether he is someone who belongs to the Australian Muslim community or not, we are still waiting for information to be provided by police, and based on that if there's something the Muslim community can do or assist, we are there."

The director of the Global Terrorism Research Centre, Professor Greg Barton, said the black flag was clearly meant to signify a link with a terror group, possibly the Islamic State.

"It's likely a link with its groups, and what's happening in Syria, rather than a statement of faith," he told 702 ABC Sydney.

"But it could also be a single lone wolf attacker."

Two people walk out of a building during a siege in Sydney's Martin Place. ( ABC News )

The UN Alliance of Civilisations' Aftab Malik, a scholar-in-residence at Sydney's Lebanese Muslim Association, said the flag had been misappropriated by extremist groups.

"The Shahadah [phrase on the flag] literally means the testimony of faith and Muslims believe it is a transcendental truth," he said.

"We're seeing a branding war taking place amongst various extreme groups, Jabhbat al-Nusra, Al-Qaeda and the offshoots, and now we have ISIS.

"They're using very powerful spiritual realities and being misappropriated for their misguided political agendas."

People seeking more information about the incident, including about government services, can call the Public Information Inquiry Centre on 1800 227 228.