SYDNEY—Large parts of central Sydney were in lockdown Monday after at least one gunman took hostages in a cafe and draped an Islamic flag in the window, sparking concerns a terrorist attack was under way. (Latest news: Police Negotiate With Gunman)

Authorities sealed off surrounding streets, evacuated people from buildings, and suspended several rail routes into and out of the city after the incident began around 9:45 a.m. at the Lindt Chocolate Café in Martin Place in the heart of the business district.

The perpetrator, who demands a meeting with Australian Prime Minister Tony Abbott and for an Islamic State-style flag to be sent to the politician, has held the remaining people hostage since 10am local time and has claimed to have bombs planted in the café and around the financial district.

While the hostages have clearly been seen through the window being made to hold up a black-and-white flag in the terrifying situation, people outside took it upon themselves to take photos of them smiling and laughing.