A number of people are being held hostage in a siege at a cafe in the heart of Sydney’s CBD.

At least three people have been seen with their hands raised and pressed against the windows of the Lindt Chocolat Cafe, in Martin Place.

A black flag with Arabic text has also been seen hanging in the shop window.

Dozens of heavily-armed police officers wearing protective clothing and helmets have flooded the area with guns drawn.

Witnesses have reported hearing loud bangs that sounded like gun shots.

Live coverage from ABC Australia

By Harry