Staff and customers hold up what is believed to be a jihadist flag up against the window of the Lindt cafe. Source: Channel 7

At least three people were seen running from the Martin Place cafe.

One staff member and two customers are now free but it was not immediately clear if they were released or had escaped.

Two came out of the front door and one from a fire door. All had their arms raised in the air.

Dramatic television images showed the terrified hostages running free from the buiding and being shielded by heavily armed police.

One was a man in a white shirt and blue jacket, another wore a white shirt, while the third was clearly the Lindt cafe worker dressed in black.

A hostage is seen outside the Lindt Cafe, Martin Place. Source: Getty Images

Two hostages run to safety outside the Lindt Cafe. Source: Getty Images

Dramatic scenes outside the Lindt Cafe as hostages run free after six hours of being held captive. Source: Getty Images

It followed reports that as many as 50 people being held by a gunman at the popular cafe. However, when asked this afternoon about the number of hostages NSW Police Deputy Commissioner Catherine Burn said: “That sort of number does not equate to what we are assuming.”

At least one offender took hostages at the popular Lindt chocolate cafe, in Martin Place, just before 10am.

Some members of staff could be seen wearing their shop aprons and standing with their hands up at the windows. There is also a black and white flag being held up in a window. It is believed to be the Black Standard, a flag that has been hijacked by jihadists and Islamists.

Police said they would be checking the conditions of the three released hostages and then would determine what had been going on inside the cafe.

Deputy Commissioner Burn said police had spoken with the gunman for the first time since the siege began.

Three hostages - two customers and one employee - run out of the Lindt cafe where there is currently a hostage situation. Courtesy: Seven Network

Her information was that the remaining hostages hadn’t been harmed.

The incident has not been branded a terrorist attack yet, but police have confirmed they have “moved to a footing consistent with a terrorism event” in their response.

NSW Police Commissioner Andrew Scipione earlier told reporters it remained a hostage situation “but we are ready to escalate if we need to”.

They did not have “direct contact” with the hostage-taker.

“We’re working through that - at this stage we’ve not got extensive communications ... We are not dealing directly with him.”

It was not clear what the offender’s motivation was.

Lindt Australia CEO Steve Loane earlier told news.com.au he believes there are 40 to 50 people inside the cafe, including customers and staff.

Other reports are suggesting there may only be 13 hostages.

Police handcuffed a man 200m from the cafe siege but a police statement has since clarified the arrest was unrelated to the siege.

RELATED: Lindt workers wait for news as hostage situation continues

One of the men believed to be holding people hostage: Courtesy: Channel 7 Source: Channel 7

Picture: Courtesy of Channel 7. Source: Channel 7

The National Security Committee of Cabinet has met for briefings on the situation this morning.

At a press conference this morning Prime Minister Tony Abbott said the government did not know whether the hostage situation was politically motivated.

“We don’t yet know the motivation of perpetrator, we don’t know whether it’s politically motivated although there are indications it could be,” he said.

“The whole point of politically motivated violence is to scare people... Australia is a peaceful, open and generous society and nothing should ever change that and that’s why I urge all Australians to today to go about their business as usual.”

Mr Abbott urged all Australians to go about their business as usual but if anyone noticed anything unusual they should call the National Security Hotline 1800 123 400.

He said that the ordinary business of government would go on and the Budget update would be released as planned.

NSW Premier Mike Baird said this afternoon: “We are being tested today in Sydney. The police is being tested, the public is being tested, but whatever the test ...we will remain a democractic, civil society.

“There could be some disruption obviously, we are asking also to be patient ... we will get through this.”

NSW Police Commissioner Andrew Scipione confirmed an “armed offender” was involved. Police were doing everything in their power to bring the situation to a “peaceful outcome”.

“We have a number of incidents that people believe are connected to the city events

a lot of people concerned when they see police vehicle drive down their street, (that area is involved). This is not the case.”

He said there were a number of officers on standby and was satisfied with the response so far. “It’s as good as you will get anywhere.”

Major landmarks in Sydney, including the Sydney Opera House, have been evacuated as police respond to a hostage situation inside a Martin Place cafe. Source: Getty Images

Police are patrolling landmarks around Sydney in response to the Martin Pl hostage siege. Source: Getty Images

In a statement earlier, Mr Abbott said he had also spoken with NSW Premier Mike Baird and “offered him all possible Commonwealth support and assistance”.

“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.

Mr Baird said his thoughts and prayers were with those affected.

“I’ve spoken to Police Commissioner Andrew Scipione & have full confidence NSW Police are working effectively to resolve the situation,” Mr Baird said.

Opposition Leader Bill Shorten said he had spoken with Mr Abbott this morning and offered him the Opposition’s full support.

“Our thoughts and prayers today are with the innocent people involved ... (and) also with their families who are seeing this incredibly distressing situation unfold, along with the rest of Australia.

“Australians can be assured that we are one when it comes to keeping Australians safe.”

Tactical response officers arrive at the scene. Picture: Toby Zerna Source: News Corp Australia

Siege at Martin Place. Source: Supplied

Earlier today, Sydney talkback show host Ray Hadley reportedly spoke to one of the hostages inside the cafe off air.

A spokesman for 2GB said Hadly spoke to someone who he believed was a hostage inside the cafe.

The radio presenter called the number more than once and passed the name and details onto the police.

International reaction to the crisis has been swift with Canadian PM Stephen Harper tweeting his support and US President Barack Obama being briefed on the situation at the White House.

Lindt Cafe released the following statement on their Facebook page.

“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.”

Also on Facebook were pages supporting the gunman, including one called “Lindt cafe bombers supporters facebook page”. Facebook swiftly removed the page, and urged users to report any offending pages immediately for them to remove.

Police have set up an exclusion zone around the cafe in Martin Place.

BUILDINGS EVACUATED

A Lindt cafe worker who managed to get out of the building told Nine News: “Everyone was sitting down, the door was locked. There was one guy walking around with a hat and a beard.”

Channel 7 reported that a woman told police that she saw a man near the cafe at 9.44am carrying a blue sports bag with what she thought was a gun inside.

The chocolate shop is 30 or 40 metres from the Channel 7 offices so they have cameras trained on the building. Channel 7 has been evacuated.

Martin Place is home to several prominent buildings, including NSW Premier Mike Baird’s office, the Reserve Bank of Australia, Westpac Bank and the Commonwealth Bank headquarters as well as the US embassy and the Seven Network. The Supreme Court, Sydney Hospital, State Library of NSW, and NSW parliament were also in lock-down.

The Sydney Opera House was also in lock-down for a short time as authorities enacted a cluster of security measures across the city.

The US Consulate has also been closed.

Seven reporter Chris Reason is currently on the corner of Philip and Hunter St where all five floors of Channel 7 staff were evacuated. He told news.com.au that he is with several hundred people from Seven and surrounding buildings.

He confirmed that police entered Channel 7 at 10am to use their building as a viewing point after the incident first happened at 9.44am.

Footage has emerged of heavily armed police running near Martin Place in Sydney's CBD.

Courtesy of Channel 7. Source: Channel 7

A map of Sydney shows where the Martin Place Lindt Chocolate cafe is located. Source: News Corp Australia

At 10.20am the entire building was evacuated and the central hosting duties was transferred to Melbourne to broadcast out of there.

Police have erected a large black shield to cover the corner of the Lindt Store from view.

Mr Reason said: “It’s tense, people are obviously concerned for the people inside. During the initial minutes when the evacuation happened there was, of course, a lot of concern, a lot of anguish from some staff. But nobody resisted, we all followed police orders. Right now, outside the building there is a mix of curiosity and concern and hope that the people inside get out OK.”

Currently there are at least 100 police and tactical units stationed in Martin Place

“I was at a cafe right next to the Lindt Store when I noticed people suddenly running towards the building and looking in. At 9.45 I sort of approached and realised what was happening. At first we thought it was an armed holdup because the RBA (Reserve Bank of Australia) is next door and there were armoured vehicles outside. When we saw the hostages against the windows holding up the flags it was quickly apparent that this was severely urgent.”

When asked whether he thought why the men may have chosen Martin Place, he said: “It’s hard to tell, as we saw in the terror raids in September, Martin Place would be a target. It might not be iconic Sydney location but it is deeply symbolic, on top of our building (Seven) is the State Government, the treasurer the minister, beside it is the financial heart of Sydney with the reserve bank and right in the centre is the cenotaph and ANZAC memorial so it ticks so many boxes when trying to make a political statement.”

There are State Government agencies in the same building and police have shut down traffic in a wide perimeter surrounding the incident. Surrounding buildings are also in lockdown.

RELATED: Martin Place long identified as potential terrorist target

There is no confirmation yet whether this is a terrorist attack.

A police statement confirmed that they were dealing with an armed incident and specialist officers were attempting to make contact those inside a cafe.

“Some nearby offices have been evacuated as a precaution. Anyone else in the area encompassing Hunter, George, Elizabeth and Macquarie streets bordering Martin Place is directed to remain indoors and away from open windows. Anyone in the vicinity but outside that area is free to leave their buildings,” the statement said.

“Police urge members of the public to remain calm and note that an appropriate police presence is in place.

Elsewhere in Australia, security has reportedly been increased at the Gabba ahead of the cricket and the Lindt Cafe in Melbourne has been closed with police patrolling the streets outside.

TRANSPORT IMPACTED

The Martin Place train station is shut and trains and buses around the area are being diverted or stopped, including trains between Bondi Junction and Central. Roads are blocked.

A Transport for Sydney spokeswoman told news.com.au that conditions were still changing and they would follow directions from police.

“This is chilling,” said The Morning Show host Kylie Gillies of the scene as she watched on with host Larry Emdur from the Channel 7 news studios. The duo are now off air.

RELATED: Sydney trains cancelled, buses diverted

Right across from the Seven Network office in Martin Place, cameras focus on customers with hands in the air and holding a jihadist flag to the window. Courtesy Seven Network

Airspace in Sydney is open but some flights are being diverted around the CBD, according to Qantas.

The federal government denied reports the airspace over the Sydney CBD had been shut down.

“There are choppers in the air and air traffic is being rerouted according. At this stage no impact on the air traffic network,” a spokesman for Deputy Prime Minister Warren Truss said.

Martin Place has been completely shut down during what is a busy time for Christmas shoppers and kids on school holidays.

“The police operation is under way, we’re urging people to avoid the area while it’s under way,” a police spokesman told news.com.au

RAIDS THIS MORNING

There were reports that there were raids at Lakemba but a spokeswoman for the Lebanese Muslim Association told news.com.au that “many” police visited them at Lakemba this morning “to discuss what’s going on at Martin Place”.

She did not believe raids had been held at Lakemba.

This morning a Sydney man was taken into custody on suspicion of terrorism related offences after a morning raid from counter terrorism units of the Australian Federal Police and NSW Police.

AFP confirmed a 25-year-old Beecroft man was arrested by NSW Joint Counter Terrorism Team (JCTT) as part of continuing investigations into the planning of a terrorist attack on Australian soil and the facilitation of travel of Australian citizens to Syria to engage in armed combat.

The unfolding situation follows a series of dramatic counterterrorism raids across Sydney in September this year in which 15 people were detained. Omarjan Azari, 22, was arrested and accused of conspiring with Mohammed Ali Baryalei, the most senior Australian involved in Islamic State.

Australian Federal Police Acting Commissioner Andrew Colvin said at the time “Police believe this group had started planning to commit violent acts in Australia. Those acts related to random acts against public.”

It’s understood there were plans to grab a random person off the street in Martin Place and execute them while posting a video to social media. The ABC also reported at the time Brisbane based suspects had bought machetes, balaclavas and military fatigues

Commonwealth prosecutor Michael Allnutt said at the time the act was designed to shock and terrify. “I don’t think I’ve seen much worse,” he said.

“It’s been an immediate reaction to a clear, imperative danger. There is still an enormous amount of material for police to assess.”

BLACK AND WHITE FLAG

The Black Standard is a flag also known as the standard of Mohammed. It carries the symbol of the eagle and was one of the flags flown by the prophet Mohammed but has been hijacked by jihadists and Islamists.

RELATED: What does the Black Standard flag mean?

In August 2014, British Prime Minister David Cameron declared anyone carrying The Black Standard could be arrested.

It is also banned from public demonstration in the Netherlands

The use of the image the flag for non-educational purposes is forbidden in Germany.

MORE TO COME