A black flag bearing Arabic script held up at a cafe in central Sydney has become the subject of worldwide scrutiny for the clues it might yield to the motivation behind the hostage-taking.

The distinctive banner was held up to the window by people inside the Lindt Chocolat Cafe, which is surrounded by armed police standing off against at least one hostage taker who is thought to have a weapon.

Its white-on-black lettering resembles that seen on flags flown by Islamic State (IS), the murderous faction which has conquered swathes of territory across Iraq and Syria in recent months, and other Islamist terror organisations such as al Qaeda.

Zain Ali, head of the Islamic Studies Research Unit at the University of Auckland, said it was difficult to make out exactly what the white script on the flag in the cafe said because the upper half was obscured.

However, he said he believed it to be the Shahada, or declaration of faith, largely because a black flag with white writing in a contemporary context often contains that message.

He added that he could make out the word "Mohammed."

Mr Ali said the Shahada translates as "There is no deity of worship except God (Allah), and Muhammad is the messenger of God."

It is considered the first pillar of Islam's five pillars of faith, and although it has been used by groups like al Qaeda and IS it was not invented by them, Mr Ali added.

A grainy image of a man thought to be keeping the hostages at gunpoint taken by Channel 7 News cameras also shows him wearing a black bandana with white writing on it.

The script is not clear enough to make out exactly what it says, but some Arabic speakers on social media claimed it also mentioned the word 'Mohammed' and words pledging allegiance to Islam.