SYDNEY, Dec. 15 -- Five hostages have been released from a Sydney cafe, which has been held siege by an armed man showing Islamic flags on Monday.

Originally three hostages were released, but a further two more people have been seen leaving the cafe.

The siege began on Monday morning and has involved hundreds of armed police who have surrounded the cafe in the center of the Sydney CBD.

The hostages have been forced to hold a black and white Islamic flag on the cafe window.

A police spokeswoman confirmed that officers are attending the scene and an operation was underway surrounding the Lindt Chocolate cafe.

Lindt Australia CEO Steve Loane told news.com.au he believes there are 40 people inside the cafe, including customers and staff.

According to local radio, the gunman have told police negotiators that they have planted "devices" all around Sydney and demanded to talk to Prime Minister Tony Abbott.

Staff in shop aprons can be seen with their hands on the windows.

Local nearby streets have been closed and all trains are shutdown near the area. Police officers have guns drawn outside the cafe.

Police have also evacuated the Sydney Opera House and shut down traffic on the Sydney Harbor Bridge.

The Federal Government has convened a meeting of the National Security Committee this morning. It has been warning for months that a terror attack in Australia could happen.

Autralian Prime Minister Tony Abbott said after the September terror raids, that all that is required for a domestic Islamic State ordered terror attack is a "knife, iPhone and a victim".

New South Wales police commissioner Andrew Scipione told reporters that police are doing all they can to resolve the situation peacefully.

He said there are tight controls around the location, and they had not made contact with the gunman. "The officers there are well trained. They know what they are doing," he said.

Scipione said police still did not know the gunman's motivation and were working to determine where he was from. He said the police presence is "very heavy," and involved hundreds of police officers.

He said police are still trying to determine what the Islamic flag stands for. "It's a flag that we've had people looking at. We 're working with partner agencies to better determine what we're dealing with," he said.