Two people have died, along with an Islamist gunman, after commandos storm a cafe held under siege for 16 hours in Sydney, police say. Photo: BBC

The gunman, identified as an Iranian refugee, had taken dozens of hostages.

Paramedics were seen carrying away several injured people.

The centre of the city was put in lockdown when the gunman seized the hostages early on Monday, forcing some of them to hold up a black Islamic banner at the window of the Lindt cafe.

The cafe is located in Martin Place, a busy shopping area in Sydney's financial district.

Several people appear to have been injured

Prime Minister Tony Abbott said it was "profoundly shocking" that people were being "held hostage by an armed person claiming political motivation".

Dramatic scenes

The Australian police said the victims were a 34-year-old man and a woman, aged 38.

Another man, who was 50, also died. He is believed to be the gunman.

We do not know yet what triggered the assault, the BBC's Phil Mercer reports from Sydney.

However, reports in the local media suggest the commandos from the Royal Australian Regiment entered the building after the gunman started firing shots.

Shortly after 02:00 local time Tuesday (15:00 GMT Monday), several hostages fled from the building.

Minutes later, the commandos with assault rifles and wearing helmets and body armour could be seen piling into the cafe, tossing stun grenades ahead of them, and apparently opening fire.

Hostages ran to safety with their hands in the air. A man and a woman were seen being carried to safety by emergency services. Medics were seen treating a person lying on the ground.

The dramatic scenes of the rescue operation were broadcast live on television.

New South Wales police announced the end of the siege at 02:44 local time (15:44 GMT) in a tweet, promising details later.

Sixteen-hour siege

09:45 Monday local time (22:45 GMT Sunday): Police are called out to the Lindt Chocolat Cafe in Sydney's Martin Place, a busy plaza in the heart of the city. Suggestions an armed robbery is under way are soon discounted

10:09: Australian TV stations broadcast footage of hostages holding a black Islamic banner up to the window. The gunman can also be seen, wearing a bandana

12:30: As police flood the area, Prime Minister Tony Abbott goes on national TV to promise a thorough police response to the "deeply concerning incident"

16:00-17:00: Three men, then two women, sprint to safety from the cafe's fire exit

18:30: Police confirm negotiations are under way with the gunman

02:20 Tuesday (15:20 GMT Monday): Several more hostages escape and commandos storm the cafe

02:48: Police officially confirm end of siege. Reports suggest gunman and one other person dead, several people injured

'Isolated figure'

As many as 40 customers and staff were taken hostage. Five managed to escape through a fire exit on Monday afternoon.

Mr Monis is well known to the Australian police

Suspected gunman Man Haron Monis received political asylum in Australia in 1996 and was on bail facing a number of charges.

On a website, now suspended, he describes himself as a Shia Muslim who converted to Sunni Islam.

The self-styled cleric was described by his former lawyer as an isolated figure.

One of his demands was to have a flag of Islamic State, the Sunni militant group which recently seized territory in Syria and Iraq, to be delivered to the cafe.

Martin Place is home to the state premier's office and the headquarters of major banks.

At the nearby Sydney Opera House, evening performances were cancelled as shops and offices in the area shut early due to the security situation.

"It's sad to think this is my home and that it could happen anywhere," onlooker Rebecca Courtney told AFP news agency.

In September, Australia - which has sent fighter jets to join the US-led coalition conducting air strikes against Islamic State in Iraq - carried out a big anti-terror raid.

One man was charged with plotting to behead a member of the public in Martin Place.

In October, the Australian parliament approved new anti-terrorism laws, including a provision designed to stop Australians fighting in overseas conflicts.