Around 15 people are being held hostage in the Lindt café by the lone gunman. The gunman had earlier rotated the hostages for around two hours at a time for stints pressed against the glass windows of the venue. Hostages are also reportedly being fed from the kitchen at the rear of the café.
Five hostages have escaped the siege so far. One has been taken to hospital for treatment, with the nature of his condition unclear.
The gunman is described as bearded with a white shirt, wearing a bandana and armed with a shotgun.
Meanwhile, two hostages have contacted 9NEWS with demands from the gunman.
9NEWS reporter Mark Burrows says it was "upsetting in the extreme" to speak with two hostages, both women, inside the cafe this afternoon, who both contacted the station's newsroom at the demand of the gunman.
Burrows said he could hear the gunman in the background "clearly ... outlining his demands", which 9NEWS has refused to air in cooperation with authorities.
Burrows said the first woman "sounded remarkably calm as she detailed (the gunman's) demands".
She asked Burrows to pass on a message to her husband, who also remarked that his wife was "always so cool in a crisis".
The second woman Burrows spoke to was "agitated" that nothing seemed to be happening, the journalist said.
"She also relayed more of his demands but he (the gunman) would not come to the phone," Burrows said.
"It was upsetting in the extreme to hear these women talking ... women who should be at home with their families ... who are now plunged into a deadly situation."
NSW Police Deputy Commissioner Catherine Burn earlier confirmed three hostages had exited the cafe.
She said there was nothing to suggest any of the remaining hostages had been harmed. Ms Burn also confirmed police had made contact with the gunman.
Video filmed outside the cafe shows three people running out of two separate doors. It is understood the hostages escaped the cafe, rather than being released by the gunman.