The lone gunman and two hostages were killed and four other people wounded when police stormed a Sydney cafe where 17 people were being held early Tuesday, authorities said.

The lone gunman and two hostages were killed and four other people wounded when police stormed a Sydney cafe where 17 people were being held early Tuesday, authorities said.

The 50-year-old male who held out for more than 16 hours was shot and pronounced dead after being taken to hospital, New South Wales police said.

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

"It was the act of an individual. This should never destroy or change the way of our life," NSW Police Commissioner Andrew Scipione said at a press conference.

Police said they had launched a "critical incident investigation" into the operation that ended the siege in a city centre cafe.

"About 2:10am (Tuesday), a confrontation occurred between police and a man who had taken a number of people hostage inside a cafe on Martin Place," the police statement said.

"Shots were fired during the confrontation.

"As a result, the 50-year-old man was pronounced dead after being taken to hospital."

The attack occurred at about 9:44 a.m. local time, police said. About five hours into the drama, three people emerged from the building, with two in cafe aprons leaving the cafe about an hour later.