NSW Police Deputy Commissioner Catherine Burn addresses the media on Monday. Photo: Kate Geraghty

The NSW Police have activated Task Force Pioneer, meaning the hostage situation in Sydney's Martin Place is now being treated as a terrorist attack.

Deputy Commissioner Catherine Burn confirmed the taskforce had been activated just before 4pm on Monday. It is believed to be the first time Task Force Pioneer has been used.

A screenshot from Channel Seven of tactical police as hostages leave the Lindt cafe. Photo: Channel Seven

Ms Burn made the announcement moments after three men managed to escape from the Lindt Chocolat Cafe, six hours after the hostage situation began. It is still unclear how many people are inside the cafe.

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Task Force Pioneer, used only when responding to a terrorism-related incident, means a co-ordinated police operations centre has been established. Regular briefings will also be held to keep the public aware of what is happening.

"We still don't know what the motivation might be," Ms Burn said. "But in terms of our protocols we've set up our command and control protocols."

Deputy Commissioner Burn said an exclusion zone is in place taking in Hunter, Pitt, King and Elizabeth streets.

"A peaceful resolution is what we are working towards," Ms Burn said. "It is okay to leave the city, it is okay to go home as you usually would."

Ms Burn said police negotiators had made contact with the gunman but his motive was still not clear and warned that it was unhelpful to speculate what might have sparked Monday's attack.