One of the victims of the Sydney cafe siege may have died after being struck by a police bullet.

According to Australian media reports, Katrina Dawson (38) was killed when fragments of a police bullet ricocheted and hit her in the heart and shoulder.

Ms Dawson was one of two killed when officers stormed the Lindt cafe to end the 16-hour siege, where Man Haron Monis was holding 17 hostages.

They were taken hostage on December 15th by the Iranian, who was a self-styled cleric with a long criminal history.

He had been charged with being an accessory to the murder of his ex-wife and dozens of sexual assault offences.

The standoff ended 16 hours later when police stormed the cafe in a barrage of gunfire to free the captives.

The Australian Prime Minister Tony Abbott has ordered an inquiry into why Monis (50) was not under surveillance and how he obtained Australian citizenship.

Mr Abbott said Monis had been placed on the Australian Security Intelligence Organisation's watch after sending a series of offensive letters to the families of soldiers killed in Afghanistan.

He was convicted and sentenced last year to 300 hours of community service for sending what a judge called "grossly offensive" letters.

The probe into events at the cafe is on-going, and there has been no official comment by the New South Wales police.