A 16-year-old boy was in the advanced stages of planning a terrorism attack on Sydney's Anzac Day commemorations, police say.

NSW Police Commissioner Andrew Scipione said the boy was arrested by counter terrorism police near his Auburn home on Sunday afternoon.

Addressing the media after the Dawn Service in Sydney, Mr Scipione said police were unsure which Anzac Day event was to be targeted in the attack.

But he said the threat related to Sydney and was at the stage where counter terrorism officers had to act and act quickly.