Witnesses saw food prepared in the cafe's kitchen brought out to the remaining hostages, thought to number between ten and 15, as the stand-off with heavily armed police entered its twelfth hour.

The drama began unfolding around 9,30 am, when a gunman entered the cafe, located in one of busiest plazas in Sydney's central business district, and pulled a shotgun from a blue carry bag and disabled the doors to the business.

Soon afterwards, hostages were seen with their hands pressed against the windows holding up the Islamic Shahada flag. It is an emblem of extremist group Jabhat al-Nusra, which is fighting the Assad government in Syria. The man was described as wearing a headband with Arabic writing on it.

Scores of police rushed to the scene, evacuating surrounding buildings and closing off part of the city. The scene sent shockwaves across Australia, where terror attacks have rarely touched home soil.

Paramilitary police armed with automatic rifles spent all day Monday surrounding the cafe, but senior commanders said they would be taking a patient approach to the siege and hoped to end it through negotiation with the gunman.

A total of five hostages, including barista Elly Chen, managed to escape the cafe by scrambling out a side door about seven hours into the drama. Fear etched on their faces, they ran into the arms of waiting police.

It is understood the hostages escaped from the cafe, rather than being released by their captor. One former male hostage has been taken to nearby St Vincent's Hospital, in Sydney's inner suburbs, and is being treated for a pre-existing condition. 

The gunman flew into a rage when he realised some of his captives had escaped.

'The gunman could be seen from here getting extremely agitated, shouting at remaining hostages,' tweeted journalist Chris Reason, who has a direct line of sight into the cafe from the Seven Network newsroom directly opposite and inside the police cordon.  

The light inside the building has gone off tonight, Mr Reason said, but police would not reveal whether it was a law enforcement or hostage-taker tactic. 

Police negotiators have learned the name of the man and have made contact.

This evening, Mr Reason said he could see the gunman rotating the hostages through positions in the store's window.

'From inside Martin Place we can see the faces of hostages - pained, strained, eyes red and raw,' he recounted. Food and water was also being delivered to the prisoners from the cafe's back kitchens.

Seven Network staff have counted around 15 hostages in the cafe, he said, rather than the 50 reported by Lindt Australia CEO Steve Loane earlier on Monday.  

(dailymail.co.uk)