One of the three men arrested during counterterrorism raids in Sydney's west on Tuesday morning was planning an attack on prominent Harbour City buildings, police allege.

Key points: Police allege Isaak el Matari was planning an attack on Sydney police stations, courts and churches

Police allege Isaak el Matari was planning an attack on Sydney police stations, courts and churches He and two other men were arrested as part of a counter-terrorism operation which targeted several Sydney suburbs

He and two other men were arrested as part of a counter-terrorism operation which targeted several Sydney suburbs One man from Toongabbie will be charged with being a member of Islamic State

Isaak el Matari, 20, was taken into custody on Tuesday as part of the operation, which targeted suburbs including Canada Bay, Chester Hill, Greenacre, Green Valley, Ingleburn and Toongabbie.

Police allege he had a range of targets in Sydney, including police stations, consulates, courts, and churches.

Two other men, aged 23 and 30, were also arrested as part of the operation led by the NSW Joint Counter Terrorism Taskforce (JCTT).

Police allege Mr el Matari and the 23-year-old identified as members of Islamic State.

Mr el Matari was expected to be charged on Tuesday with preparing a terrorist act and traveling overseas to engage in hostile activities.

Both offences carry a maximum penalty of life in prison.

Police will allege Mr el Matari had made early-stage preparations and had expressed an intention to carry out a terrorist attack in Australia.

The scene in Toongabbie where one of the raids took place this morning. ( ABC News: Jonathan Hair )

The JCTT comprises both NSW Police and AFP officers.

AFP assistant commissioner Ian McCartney said Mr el Matari had been monitored since returning from Lebanon last year.

"We will also allege this man had indicated he was willing to travel to Afghanistan to fight for Islamic State, and he made a number of preparations to do so," he said.

NSW Police assistant commissioner Mick Willing said the arrests represented the "16th disruption" since terror threat levels were raised in 2014.

"There are people out there who still want to commit acts of terror in this country, sadly, but we're doing everything we can to prevent those acts of terrorism taking place and public safety is always our first priority," he said.

Police said the 23-year-old, from Toongabbie, would be charged with being a member of Islamic State.

Jared Li witnessed the police raid in Toongabbie, and said: "I just heard yelling, and police going 'police, don't move'."

"I knew the kids, they were my good friends in primary school, they were pretty close but we kind of separated after a few years."

Neighbour Graham Banks says it was frightening to have "a massive police van virtually parked in our front yard" ( Jonathan Hair )

Neighbour Graham Banks said the raids were frightening for residents of the quiet street.

"Waking up this morning the whole cul-de-sac was full of cars, we had police running backwards and forwards and all of a sudden these massive police vans turned up," he said.

"It's just such a massive police presence."

Police said the 30-year-old man was an "associate" of the other two who were arrested.

He will be charged with fraudulently claiming unemployment benefits — an offence that carries a maximum sentence of 10 years behind bars.

Home Affairs Minister Peter Dutton said a temporary exclusion bill will be introduced to the Parliament on Thursday.

"This is incredibly important because it will be alleged that one of the individuals arrested today returned from overseas as an Australian citizen," Mr Dutton said.

"The temporary exclusion order is the ability for a person to be excluded, prevented from turning back from Syria, for example, for two years."