Two hostages and the hostage taker are confirmed to have died after police stormed a Sydney cafe where up to 20 people have been held for 17 hours. 

According to a press release, another four people were injured, including a police officer, but that three of those are considered non-life threatening.

Earlier today at least half a dozen heavily-armed police threw flash grenades through an entrance to the building, then advanced into the cafe with their guns raised.

A series of loud explosions were heard.

Moments earlier at least five more panicked hostages escaped from the Lindt cafe in the city's central business district.

The gunman holding up to 20 people hostage in a Sydney cafe has been named as Sheikh Man Haron Monis (49).

He has been holed up in a cafe in the heart of the city's financial and shopping area for several hours, raising a black Islamist flag and using human shields in the window.

Five of the hostages earlier managed to escape but police say they do not know how many are still inside.

Sydney police say Monis - who claims he has planted two bombs inside the cafe and two more nearby - is well-known to them.

Chilling footage has emerged of a female hostage apparently trying to communicate with police by miming her throat being cut - while news channels have chosen not to broadcast a video of another hostage relaying the assailant's demands.

Witnesses described seeing the hostages looking "exhausted" and "absolutely petrified" - but as night fell and the siege entered its 11th hour the gunman turned off the lights, meaning people outside could no longer see in.

Earlier, two Arabic flags similar to those used by Islamic State have been seen inside the Lindt cafe in Martin Place.

Channel Ten has spoken to two hostages who say the gunman claims to have four bombs - two inside the cafe and two in the financial district.

Police are investigating reports the assailant has used hostages' social media accounts to demand a meeting with Australian Prime Minster Tony Abbott.

It is now thought officers know the identity of the man - and that he was previously known to the Sydney force.

Some of the hostages have spoken to their families on mobile phones - while five, three male customers and two female staff, have managed to escape since the siege began.

This woman's son has been caught up in the ordeal.

Sydney hostage siege: What we know so far

Journalist Chris Reason, who has a view of the cafe from the Channel 7 building, said the gunman was "extremely agitated" when the hostages fled.

But he said the gunman had now "switched out the lights" so the cafe had "gone completely black".

"We can see very little of what is going on inside, which is obviously not good news," said Mr Reason.

"From our position over the last couple of hours we have counted 15 hostages in total. Five of those have escaped. They are all ages, all demographics. Fortunately no children that we could see."

Mr Reason said the gunman had been forcing hostages to stand at the window with their hands against the glass - and that they were rotated every two hours.

One woman in that position looked like she had been "crying her heart out", he said - while others looked "exhausted" and "absolutely petrified".

Patrina Cooke (24) from Strabane in Co Tyrone works in the Avenue Restaurant, which is on the same block as the Lindt cafe.

She told Highland Radio the ordeal was terrifying.

The gunman - who has contacted several media outlets from the cafe and reportedly wants an IS flag delivered there - has been seen using hostages as human shields.

Food has now been taken into the cafe for the hostages.

Bernard Keane is political editor at the news website Crikey. He told Pat Kenny here on Newstalk there is still a lot not known about the gunman and his motives.

Irish consulate shuts

New South Wales Police deputy commissioner Catherine Burn confirmed that several people have "emerged from the location" where the hostage crisis has been unfolding.

"The first thing that we are doing is making sure that they are OK. We will then establish who they are and then we will continue to work with them," Ms Burn said.

"We do not have any information that suggests that anybody is harmed at this stage."

She spoke earlier to reporters.

Martin Place - home to the Reserve Bank of Australia, commercial banks and close to the New South Wales state parliament - has been closed off and up to 100 heavily armed police are surrounding the area.

Meanwhile, the Irish consulate in Sydney has closed for the day due to the situation.

Due to the security incident in Sydney CBD the CG public office is now closed and will re-open Tues at 10am. Apologies for any inconvenience

— Irish Consulate (@IrelandSydney) December 15, 2014

It is also advising Irish citizens in central Sydney to maintain "a high level of vigilance and take appropriate steps to enhance their personal security."

"Irish citizens are strongly encouraged to review their personal security plans, remain aware of their surroundings, monitor police updates...Irish citizens are advised to stay away from Martin Place and surrounding area," it adds.

Earlier, live television footage showed patrons inside the cafe standing with their hands pressed against the windows. A black flag with white Arabic text, similar to those used by Islamic State fighters in Iraq and Syria, was also visible.

People are seen standing at the cafe windows

Cameron Price from Sky News Australia is at the scene, and he spoke to Newstalk Breakfast earlier.

According to reports, at least one gunman walked into the cafe just before 10am local time. Witnesses reported hearing loud bangs which sounded like gunshots and that he was using a young woman "as a shield" inside the cafe.

Sydney siege flag is examined for terror clues

Kathryn Chee works in the cafe, and broke down as she described seeing her colleagues held captive.

Sydney Opera House was evacuated earlier after a suspicious package was reportedly found not long after the police operation in the financial district began.

Eyewitness Chris Kenny was one of the first people to notice something was very wrong.

Australian Prime Minister Tony Abbott said he has convened the National Security Committee for emergency briefings following the "hostage-taking 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," he said.

New South Wales state police commissioner Andrew Scipione said police are "dealing with a hostage situation with an armed offender", but it was not being treated as a terrorism-related event at this stage.

He said there was "at least one" offender "holding an undisclosed number of hostages".

The incident comes after the Australian government in September raised its terror threat level and conducted large-scale counter-terror raids across the country.

Watch the moment some of the hostages escaped from the cafe:

Originally published 00:50