Three police shot, man dead after 'terrorist attack' in Melbourne, Australia

The Nepean Highway at Brighton was closed as the siege unfolded

Victoria Police confirmed that the Melbourne siege, where a shootout left two men dead, three police officers injured, and a woman hostage rescued, is being treated as a terrorism-related incident, after Islamic State claimed responsibility for the attack.

He had taken a prostitute hostage and forced her to ring the Seven Network's Melbourne newsroom on Monday afternoon.

The fatal standoff, which ended in a volley of gunfire, saw a man murdered, the woman taken hostage, three officers shot, and the gunman killed by police.

The gunman killed the man with a sawn-off shotgun, held a Colombian woman hostage, tampered with his Global Positioning System bracelet and shot the three officers before dying in a hail of bullets.

Khayre had been known to security forces for nearly a decade and had been cleared of involvement in a plot to attack an army barracks in Sydney in 2009, Chief Commissioner of Victoria Police Graham Ashton told reporters.

Police search the home of Yacqub Khayre at Roxburgh Park, Melbourne, Australia, 06 June 2017.

"We do have our counter-terrorism command working on it with our crime department investigators", deputy police commissioner Andrew Crisp told reporters last night.

"He has a long criminal history with us, but also from what we're piecing together comments he made related to Islamic State and Al-Qaeda certainly for us put this in the terrorism category", he said, adding that, Khayre was released on parole in November previous year.

Regarding the ISIS claim the gunman was a "soldier" of the group, Ashton was again sceptical.

Hao, 36, also known as Nick, was shot and killed by gunman Yacqub Khayre in the foyer of the apartments, where he worked as the receptionist, in Bay Street, Brighton, at around 4pm.

Khayre was previously known to police.

In December of that year a gunman killed two hostages during a 17-hour siege at a popular Sydney cafe. Three police officers were wounded.

A second man, now revealed to have been Khayre, was allegedly holding a woman hostage in one of the apartments, refusing to let her leave.

The Amaq news agency - which is affiliated with the so-called Islamic State group - carried a statement claiming responsibility.

Mr Turnbull said yesterday the attack underlined the need to be constantly vigilant.

"He appears to (have been) in the wrong place at the wrong time", Comm Ashton said.

"We're aware of them having claimed responsibility, but then they always tend to jump up and claim responsibility every time something happens so we note that that has happened", he said. The plot was foiled and the Guardian reports Khayre was convicted and later acquitted of involvement in that plot.

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