Sydney siege is over @2:40AM / 3 dead 4 injured (watch the video)

Photo:7News

Two hostages and the gunman at the centre of the Sydney cafe siege are dead after heavily armed police stormed the building.

About 2.10am on Tuesday there was a "confrontation" between police and the gunman who had taken 17 people hostage in the Lindt cafe at Martin Place, NSW Police said.

Shots were fired in a bloody end to the 16-hour siege that shut down the city centre on Monday.

The hostage taker, self-styled Iranian cleric Man Haron Moris, was pronounced dead after being taken to hospital.

Another man, 34, and a woman, 38, were also pronounced dead after being taken to hospital.

Four people were injured, including a woman with a gunshot wound to her shoulder and a male police officer, who suffered a facial wound from gunshot pellets.

The crisis, which began about 10am (AEDT) on Monday, escalated dramatically about 2am on Tuesday when five hostages ran from the cafe.

Minutes later, shots were fired and police stormed the premises. Paramedics quickly followed with stretchers and ambulances took the most seriously injured to hospitals around the city.

"Unbelievably overnight we have lost some of our own in an attack we would never thought we would see here in our city," Premier Mike Baird told a press conference just before 6am.

"I come before you with the heaviest of hearts."

Mr Baird said the government's thoughts and prayers were with the innocent victims of an "horrendous, vicious attack."

"I want to say to their family and friends that everyone in NSW stands beside you," he said.

"My thoughts also remain with those hostages who have been freed.

"They will be provided every support they need in coming days and weeks and months."

Police Commissioner Andrew Scipione said officers had so far accounted for 17 hostages.

This figures included the five who escaped on Monday afternoon.

Some had traumatic injuries, some had medical conditions.

Six were uninjured.

"We also have a lone gunman who has been shot and killed and we have a male police officer who has been injured as a result of gunshot wounds to the face," Mr Scipione said.

"I have talked to that officer. He is in good condition."

The officer was likely to remain in hospital for some time.

"Not too long, we hope, but he is well and grateful to be alive," Mr Scipione said.

A police critical incident investigation into the incident which will be overseen by the Professional Standards Command.

"We need to find out what's happened here and inside that cafe," Mr Scipione said.

"It's not time to speculate or develop theories."

Mr Scipione echoed Mr Baird's comments, saying he could only imagine the terror the hostages had gone through.

"They're very brave people who in many cases were just buying a cup of coffee and they got caught up in this dreadful affair," he said.

"We should reflect on their courage, the courage that they displayed during the many hours in that room. They had to make decisions, hard decisions, and our heart goes out to them."

Mr Scipione acknowledged the grief of the families of the two hostage who had died.

"The pain they've been through, not knowing what was happening to their loved ones and not being able to help them," he said.

Just after 2am on Tuesday morning, a man in a white shirt ran from the cafe with his arms raised, dropped to the ground on police orders and was escorted to safety.

Minutes later, two more men and two women raced outside and were directed away by police.

Their escape was followed by rapid gunfire as heavily-armed officers stormed the cafe.

A second volley of shots erupted before the cafe filled with police and paramedics.

Ambulances rushed the most seriously injured to hospitals around the city.

At 2.40am, NSW Police tweeted: "Sydney siege is over."

It was a quick and furious end to a drama that had the city centre locked down inside an intense security cordon.

Reference: 7NEWS

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GUN SHOTS FIRED LIVE ON TV, SWAT TEAM STORM BUILDING - Hostages Rescued

Video from: 9News

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Video from :RT

Hostage video demand (video already shown on 7News)