At least one gunman has taken several people hostage at a cafe in the centre of the Australian city of Sydney.
Pictures on Australian television have shown at least three people with their hands up against a window, and a black flag with Arabic writing.
Hundreds of armed police have sealed off the normally busy Martin Place in Sydney’s central business district.
Australian Prime Minister Tony Abbott has described the incident as “deeply concerning”.
“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 in a statement.
A National Security Committee of Cabinet had been convened for Monday morning, the PM’s office said.
New South Wales police have asked people to avoid the area and to stay away from windows.
Police have also said that they are dealing with an “incident” at the Sydney Opera House, which has been evacuated.
Local media are reporting that a suspicious package was found there on Monday, though it was unclear whether it was connected to the Martin Place incident.
Many people were arriving at work as the area was shut down
An Australian Broadcasting Corporation reporter said that gunfire had been heard at the scene, the Lindt chocolate cafe – but this has not been confirmed.
No injuries have been reported from the incident, according to a police spokesperson.
Australia has been facing a growing terror threat in recent months, in part connected to the fight against the Islamic State militant group in Syria and Iraq.
About 70 Australians are believed to be fighting in the Middle East while another 20 have returned home.
In September, the largest anti-terror raids in Australian history were carried out in Sydney and Brisbane after intelligence emerged that people were planning to carry out random attacks on Australian soil.
Only one person was charged with terror offences.
Anti-terror legislation was passed in October, which critics said was too severe. Mr Abbott has said the threat meant “the delicate balance between freedom and security may have to shift”.
The Lindt Cafe is located in a plaza in the heart of the city’s financial and shopping district that is usually packed with shoppers at this time of year.
It is home to the state premier’s office and the headquarters of two of the nation’s largest banks.
The state parliament house is also only a few streets away.
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