One man was killed, and three police officers injured, as a result of the hostage standoff in the Melbourne suburb of Brighton, which ended after the attacker -- since named as 29-year-old Yacub Khayre -- was shot dead by police.
Australian Prime Minister Malcolm Turnbull told reporters Tuesday the attack was being treated as a terrorist incident, saying it had "shocked all Australians."
"This terrorist attack by a known criminal, a man who was only recently released on parole, is a shocking, cowardly crime. It is a terrorist attack and it underlines the need for us to be constantly vigilant," he said.
Turnbull said Khayre had been previously known to police, and had links to extremist organizations. "He had a long record of violence, a very long record of violence, he had been charged with a terrorist offense ... and acquitted. He was known to have connections, at least in the past, with violent extremism," he said.
Police said they were aware of a claim from ISIS that one of its "soldiers" carried out the attack. ISIS issued the claim through its Amaq News Agency in Arabic and English.
"It will form part of the investigation," Victoria Police senior media officer Natalie Webster said.
Attacker may have baited police
The incident began Monday afternoon when 29-year-old Yacub Khayre called a sex worker to a serviced apartment building in the affluent Melbourne suburb, Victoria Police Chief Commissioner Graham Ashton told reporters.
Once Khayre arrived at the apartments, he killed the 36-year-old Chinese-Australian concierge with a shotgun and took the female sex worker hostage, calling police to say they shouldn't try to intervene.
Large numbers of police soon arrived on the scene at about 4 p.m. local time, Ashton said, including counter-terrorism teams.
After two hours, the man burst out of the apartment and began firing at police, hitting three of them. He was quickly gunned down by law enforcement authorities.
Ashton said it was possible Khayre had taken the woman hostage to try and lure as many police as possible to the apartment. "We still don't know exactly whether that was the case ... it's early, early days," he said.
The commissioner confirmed that during the raid Khayre had called CNN-affiliate Channel 7 News to say he dedicated his attack to ISIS and al-Qaeda.
"We believe that calls (were) made by the individual inside the apartment," Ashton said.
ISIS provided no evidence to their claim of responsibility in the Melbourne attack and Ashton said there was no indication that any wider network was involved in Monday's shooting. "He was acting alone," he said.
Khayre was on parole
Both Turnbull and Ashton confirmed Khayre was known to police and had been released on parole at the time of the attack.
"(There is) a whole range of offending going back many years, most recently he's done prison time in relation to reckless intentionally causing injury," Ashton said.
"Ultimately he's been qualified on parole and was on parole at the time of this offense."
Khayre's home in the Melbourne suburb of Roxburgh Park, where he lived with his mother, was being searched by police on Tuesday.
Brighton is a suburban area in eastern Melbourne, known for its affluent residents and close proximity to the beaches of Port Philip Bay.
Police were called to the scene after emergency calls reported loud bangs or explosions, Victoria Police Deputy Commissioner Andrew Crisp said Monday, which were later confirmed to be a shotgun blast.
The woman who had been held hostage was released and was unharmed, Ashton said, while Crisp confirmed the three officers' injuries were not life-threatening.