Sydney Cafe Under Siege

Five people have now emerged from the siege at a cafe in Sydney's Martin Place.

VIDEO: Watch three hostages escape from the Sydney siege on Sydney's Martin Place

Three males and two females have fled from the building while the faces of customers and workers have been seen pressed up against a shop window of the Lindt Chocolat Cafe.

As many as 50 staff and customers are being held inside.

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PHOTOS: Hostage Situation in Martin Place

Sky News has learned there are two or more gunmen inside the cafe.

It says they believe there are 13 hostages.

MORE: Australian correspondent Murray Olds on the siege

An Islamic flag - black with white writing on it - has been held up to the glass.

In a chilling drama unfolding in the city centre, Martin Place has been shut down and scores of police are surrounding the cafe.

Workers in nearby buildings, including the Seven Network, have been ordered to evacuate the area.

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First movement in six hours

Two customers and a worker have escaped.

7 News says the former hostages are being sheltered by armed police.

Sky's Cameron Price says they came out the front door of the cafe and ran down the street.

"They were accompanied by police officers, their hands in the air."

Police yet to make contact

Police are yet to make contact with the hostage taker in Sydney.

Up to 50 people are thought to have been taken hostage at the Lindt cafe by a gunman.

Sky's Greg Byrnes told Newstalk ZB's Larry Williams radio station 2GB's day time announcer has been in contact with one of the hostages.

"We understand Ray Hadley has spoken to one of the hostages, but if and what was said, we're not going to find out and police have said that's apparently on the information of police that no details would be discussed."

He says relatives aren't having much luck getting close to the area - but many are basing the number of hostages on those people.

"They have been arriving at the area throughout the day and that's where we get this figure of about a dozen. But again, that's not confirmed. All we are told is there is a hostage taker who is armed."

NSW Premier, Police Commissioner speak - stops short of calling it a terrorist attack

New South Wales premier Mike Baird says he has full confidence in the work of police as hostages are held in a Sydney cafe.

"They today have acted decisively. They are on top of the situation and they are doing everything possible that needs to be done.

"We are incredibly lucky to have them at our disposal looking after the public in this state."

Police are urging the public to remain calm but vigilant as the siege in Sydney's CBD continues.

Contact has not been made with the suspects holed up in the Lindt cafe in Martin Place.

Commissioner Andrew Scipione has stopped short of calling it a terrorist attack.

"At this stage that's certainly something we couldn't rule out. We're not tagging it at this stage. What we've got is we have an armed offender that has a number of a undisclosed hostages in a city building."

Mr Scipione says they are still determining the motivation behind the incident.

"We have not yet confirmed this is a terrorism-related event. We are dealing with a hostage situation with an armed offender, and we dealing with it accordingly."

He says that response involves hundreds of officers.

"We've moved to a footing that would be consistent with a terrorism event."

Police have now left the Sydney Opera House, but it is still sealed off after a package was found there earlier.

There are questions over how prepared Australian authorities were for an attack.

Today's siege comes after a warning earlier this year of a terror-related attack in Martin Place - the area where an unknown number of hostages are currently being held in a cafe.

Mr Scipione says authorities had done enough to prevent such an attack.

"Well certainly if you were to look at the number of police we've had in the city, the number of officers that were on standby and the rapidness of their response, I would suggest that it's as good as you will get anywhere."

Lindt Chocolate Cafe issues statement

Via Facebook:

"We would like to thank everyone for their thoughts and kind support over the current situation at the Lindt Chocolate Café at Martin Place. We are deeply concerned over this serious incident and our thoughts and prayers are with the staff and customers involved and all their friends and families. The matter is being dealt with by the authorities and we are waiting for any updates from them."

Arrest 200m from scene

A man has been handcuffed 200 metres from the Martin Place cafe siege in central Sydney.

It's believed 13 people remain under siege in the Lindt Cafe at Martin Place.

They've been held hostage since just before midday.

There are reports a police officer has his foot on what appears to be a small black handgun.

Nine News Perth has reported they understand the arrests is not related to the current situation.

Radio station takes threatening call from Martin Place

A prominent Sydney radio station has received a call from Martin Place.

Sky News reporter Cameron Price says it's believed the caller is one of the gunmen inside the Lindt Cafe.

"He has made threats and also demands. Now we cannot confirm these reports at this stage, but we understand that authorities are taking this call extremely seriously."

The hostage-taker reportedly made threats to the radio station of other explosives around Sydney.

Ray Hadley, a 2GB radio station host, claimed the hostage-takers want to talk to Australian Prime Minister Tony Abbott live on air, the Guardian Australia reported.

A reporter for the newspaper at the scene said a man who appeared to be a priest was escorted into the cafe.

Abbott urges calm

VIDEO: Tony Abbott's press conference in Canberra

The Australian Prime Minister is urging calm, as the Sydney siege continues.

Tony Abbott has just addressed media in Canberra.

"Australia is a peaceful, open and generous society. Nothing should ever change that, and that's why I would urge all Australians today to go about their business as usual."

Earlier, Mr Abbott issued a statement, describing the siege situation as "deeply concerning" and saying the National Security Committee of Cabinet has convened for briefings.

"New South Wales Police and the Australian Federal Police are currently responding to a reported hostage-taking incident in Martin Place in Sydney," the Australian prime minister said.

"I have spoken with NSW Premier Mike Baird and offered him all possible Commonwealth support and assistance.

"The National Security Committee of Cabinet has also convened for briefings on the situation.

"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."

New South Wales Premier Mike Baird has released a statement saying his "thoughts and prayers" are with those affected.

"I have spoken to the Police Commissioner Andrew Scipione and have full confidence the NSW Police are working effectively to resolve the situation," he said.

Nearby buildings include NSW Govt offices

NSW government offices, including Premier Mike Baird's, are also in the vicinity.

Two women, whose faces are pressed up against the window, appear to be holding up the flag.

Police have closed off Martin Place between Macquarie and Elizabeth streets, and Martin Place train station has been cleared.

Police have cordoned off the area to about 150m and a special police operations unit is outside the building.

Schools in 'white level lock out'

Sky News is reporting Sydney schools are now in what's called a 'white level lock out'.

Schools have been notified of the siege in the CBD.

No school group is to leave their grounds.

Newsroom evacuates

The Seven Network's Martin Place studio in Sydney's CBD has been evacuated as a hostage drama unfolds at a nearby cafe.

Seven's coverage of the siege at the Lindt Chocolat Cafe is being telecast via Melbourne.

The Martin Place studio is Seven's main newsroom and home to breakfast show Sunrise and The Morning Show, which was on air when news of the siege broke about 9.45am (AEDT).

It's directly opposite the Lindt cafe.

It's unknown if any Seven staff are among the hostages.

A Seven representative says one of its news reporters, who's an expert in terrorism, has identified the flag being held up in the window.

He says it's believed to be an al-Qaeda flag, adding Martin Place has become a ghost town.

There are reports that the police have been taken inside the Channel 7 building and "are most likely in surrounding building to gain a better POV".

"Police are assuming the gunmen could be carrying explosives in a backpack but this is still unconfirmed," Joel McKay, who appears to be live tweeting the incident, posted.

Queensland reacts

Queensland has ordered every cop onto the streets, as Australia reacts to the Sydney siege.

Police Commissioner Ian Stewart says there's no indication or intelligence that any attack is planned for Queensland.

He briefed cabinet this morning on what he'd been told, and says he has offered support to New South Wales Police.

Eyewitness accounts

Aucklander Matthew Dale, 21, works in a restuarant on Bligh Street, near Martin Place, and was walking to start his shift when he came across the cordon.

He was standing in a crowd of about 200 people when he spoke to NZME. News Service.

"I can see a lot of armed police, dressed in black who look like the Armed Offenders Squad in New Zealand. There are detectives, too, in suits."

He said sirens were ringing out constantly as more police and officials arrived at the scene in Martin Place.

He said the atmosphere was tense and people were talking about the reports of an explosive device being inside the building.

"I'm right outside the New South Wales Government Building, which is concering. It is a little bit scary."

He said he hadn't be told to evacuate the area, but didn't expect many customers would be coming to the restuarant today.

New South Wales Police are urging caution and calm, two hours into the Sydney siege.

13 people are believed to remain hostage inside the Lindt Cafe in Martin Place.

Sky News reporter Cameron Price says police are describing it as an 'armed incident'.

"The information that we have is that there is one armed hostage taker armed with, we understand, a shotgun, perhaps a machete and it's feared potentially an explosive device."

Office worker Rosemary, was unable to get into work today.

"I got pushed back by the police as I walked up the steps.

"It was all obviously happening as I was approaching the steps to go up to the building but my work colleagues are all up there and it's a bit worrying." 

New Zealander Anita Smith works close to the cafe.

She says they got an email this morning saying there is a terror threat in Martin Place.

"So we've all bee advised to stay in the building and then about an hour ago we were told our revolving doors to our building have been locked and nobody is to come or go.

"At this stage, because I think we haven't been outside and we're not right in the thick of it, we're quite calm. But a lot of people were very nervous, contacting friends and family back home."

Morning terror raids

An operation in Sydney's northwest ended with two men in custody on suspected terrorism-related offences this morning. 

The Australian Federal Police have confirmed a 25-year-old Beecroft man has been arrested by the NSW Joint Counter Terrorism Team, and the other man is believed to have been taken into custody earlier.

The AFP says the arrests are part of continuing investigations into the planning of a terrorist attack on Australian soil.