Three people are confirmed dead, including two hostages, a man, 34, and a woman, 38, and the 50-year-old gunman, Man Haron Monis.
A policeman was also shot in the face - although his injuries are not critical. Another woman was taken to hospital with a gunshot wound to her shoulder, while two other women were taken to hospital with non-life threatening injuries and a fourth woman has been taken to hospital as a precaution.
"Australians awoke to the news this morning that the siege in Martin Place has ended," Tony Abbott said early this morning.
"Our thoughts and prayers are with the families of the two deceased hostages, the wounded and the other hostages.
"I commend the courage and professionalism of the New South Wales Police and other emergency services involved."
NSW Premier Mike Baird this morning said: "Unbelievably overnight we have lost some of our own in an attack we never thought we would see in our city.
"Today we must come together as never before. We are stronger together. We will get through this. We will get through this."
Man Haron Monis was out on bail for numerous charges including accessory to murder and sexual assault. He is not believed to have any formal links to any terror organisation.
Monis was a "self-styled cleric" with no role in any mosque. The gunman had previously sent letters to the families of Australian soldiers killed in Afghanistan and to political leaders, including former prime minister Kevin Rudd and Prime Minister Tony Abbott.
He was granted asylum in Australia in 1996. He was born in Iran.
Monis expressed outrage at Abbott`s use of the term "Team Australia" in a series of online tirades over recent days and weeks.
There were 17 hostages inside the Lindt cafe. Five escaped yesterday. Six escaped uninjured early this morning. Two of the remaining hostages were confirmed dead. At least four were taken to hospital via ambulance.
Police Commissioner Andrew Scipione said police made the decision to enter the cafe after gunshots were heard from inside.
"They made the call because they believed that, at that time, that if they didn`t enter, there would have been many more lives lost," he said.
"I think events that were unfolding inside the premises led them to the belief that now was the time to actually deploy, and they did.
"At this stage I understand there was a number of gunshots that were heard, which caused officers to move straight to a what we call an EA, an emergency action plan, and that caused them to enter."
There is speculation that the hostage group had been put in two sections. One group may have escaped, which may have precipitated gun fire.
The events of this morning brought to a close a siege that began just before 10am local time on Monday. At 9.45am reports began to emerge that an unknown number of hostages was being held at the Lindt Chocolat Cafe in Sydney`s CBD.
The area surrounding Martin Place quickly went into lockdown as hostages were seen with their hands up against the window. Workers in surrounding buildings were moved to higher floors and told to stay away from windows as evacuations began elsewhere in the city.
Public transport routes were diverted and an exclusion zone was established along streets around Martin Place.
Bus route diversions remain in place and Sydney`s Martin Place train station is also closed. Martin Place workers were told to stay home.
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