WHAT WE KNOW SO FAR
Drama begins just after 4pm at Buckingham Serviced Apartments, Bay St, Brighton
Woman alerts 000 claiming to be held hostage, police flood area
Man calls Channel 7 newsroom saying 'This is for IS' and 'This is for Al-Qaeda'
Neighbours report hearing series of gunshots just after 6pm
Man shot dead by police, body of second man found in foyer of apartments
- Three police officers sustain gunshot wounds, police confirm they're probing terror links
LATEST: Islamic State has reportedly claimed the man responsible for the deadly Brighton hostage drama was 'one of its soldiers'.
"The attack in Melbourne, Australia was carried out by a soldier of the Islamic State in response to the call for targeting the subjects of the coalition states," the group's Amaq news agency said.
IS blamed the attack on Australia's membership in the US-led coalition against the militant group.
THE State Government is treating the deadly Brighton hostage drama as a terrorism episode, the Herald Sun understands.
The gunman at the centre of the siege was known to counter-terrorism investigators and was on parole.
He was last night shot dead by police and another man found murdered after two horrific hours which plunged Brighton into lock-down.
A female hostage, believed to be aged between 20 and 30, was freed.
She spent the night at a bayside police station and it understood to have given a statement to police.
The woman is scared, but unharmed.
Three police from the special operations group were injured in a gunfight which ended with the suspect's death at a Bay St apartment complex.
A Victoria Police statement said: "Police are investigating whether the incident is terrorism-related."
A male caller to the Channel Seven newsroom in Melbourne said during the siege: "This is for IS (Islamic State)" and ''This is for al-Qaeda''.
Channel 7 Chief of Staff Nicole Bland, who took the call, said initially and extremely distressed woman was on the phone, who she could not understand.
Then a male took over and said: "This is the Brighton hostage."
He then said the siege was for IS and Al Qaeda.
The call came after the weekend London outrage in which terrorists shouted "This is for Allah" as they killed seven people.
Deputy Commissioner Andrew Crisp said: "The male exited one serviced apartment and began firing at our members.
"Our members have then returned fire which resulted in the male being fatally shot."
Witness Lee Griffin said tactical police hid behind rubbish bins before firing the fatal rounds.
"I heard an initial shot and then a wave of police arrived and that's when the next shots occurred," Mr Griffin said.
"I saw police shoot the guy. It was terrifying."
Moments later, officers freed a woman who had been held captive since the afternoon explosion.
The three police wounded suffered injuries described as not life-threatening.
Two were taken to hospital and one treated at the scene.
Premier Daniel Andrews was last night briefed by police.
"Victoria Police sacrifice so much to keep us safe. They've shown that again tonight. Thoughts are with those injured and their colleagues," he said on Twitter.
The Herald Sun has been told Prime Minister Malcolm Turnbull was briefed last night and was expected to make a dawn flight to Canberra to be further briefed on security.
Victoria Police Chief Commissioner Graham Ashton and Mr Crisp were called away from a function to be at the Brighton scene.
Counter-terrorism investigators and bomb response unit members remained at the sealed-off scene late last night.
The siege has now ended but a major police presence, including specialist tactical officers, remains at the scene, which is about 11km southeast of Melbourne CBD.
Neighbours reported hearing more than 20 gunshots in the area and police ordered everyone in the area to head to Coles supermarket.
The first police on the scene arrived to find a body in the foyer of the Bay St apartment block.
Witness Ben Vieth was standing on his balcony about 150 metres from the scene when gunfire erupted just after 6pm.
"Next minute we heard the machine gun go off,'' he said.
"It was absolutely terrifying. It went for probably three or four seconds - just constant fire.
"The police were just screaming at people to run and take cover.
"People were just ducking and running. I was just in shock - I couldn't stand up. It was full on.
"The noise was just deafening. It wasn't a couple of shots. It sounded like 20 or 30 shots."
As soon as the machine gun went off four ambulances sped to the scene, he said.
"They were obviously planned,'' Mr Vieth said. "Then I just heard two police were shot."
Police were negotiating with a man in one of the apartments who had a female hostage with him.
Jack Reid, 20, who lives close to the apartment complex, was standing nearby with his 18-year-old brother when the shots started.
A police officer shouted at bystanders to flee to a nearby supermarket.
"The policewoman was just shouting at us to get into Coles and stay there,'' Mr Reid said.
"It was pretty scary.
"She was just going: 'Everyone get into Coles now! Stay inside! Don't come out!
"We all figured it was a hostage thing.
"I am a bit shaken.
"The gunshots took us all by surprise.
"It went for at least three seconds. It sounded like a pistol or something."
Another witness told the Herald Sun police gunned down a man suspected to be holding a woman hostage.
Lee Griffin was working at a nearby dealership when he said tactical police hid behind local rubbish bins before firing.
Mr Griffin said he heard two distinct rounds of gun fire.
"It was a clear sound. It sounded like a glock or pistol," he said.
"I heard an initial shot and then a wave of police arrived and that's when the next shots occurred.
"I saw police shot the guy. It was terrifying."
Local store owner Chi from Japanese canteen 'Cheeky Chi' said she heard a "deep sound" at about 5pm.
The shopowner described the gunfire as "duh-duh-duh-duh".
Chi had closed her shop at the time and did not see police.
Locals said they were rocked by an explosion around 4:30pm this afternoon at the apartment block and were evacuated shortly after.
The area was cordoned off by heavily armed specialist officers with locals warned to stay away.
The busy shopping strip has been blocked off and police are diverting traffic away from the area.
The siege unfolded at Buckingham Serviced Apartments at 408 Bay St, which are next to a children's swimming school and several doctors offices.
The apartments advertised as "luxury" apartments with private balconies and "spacious and modern decor."
One bedroom apartments cost around $130 per night.
The apartments are directly opposite the Brighton swim school which is a popular children's swimming lesson venue in the area.
Firbank Grammar School and Brighton Grammar school are within walking distance of the scene and schoolchildren could be seen nearby in the aftermath of the siege.
More than 20 shots have been fired during a hostage situation in Brighton. Picture: Matt Talbot-Weichmann
Witness Courtney Ardern said she was inside Brighton Spinal Group on Bay St when police ordered everyone to evacuate at about 5.15pm.
"There are helicopters flying round and a carpark full of police, including a van with armed police," Ms Ardern said.
"I also overheard someone saying they were evacuating an entire building nearby."
Ms Ardern said the area was swamped with police and the road had been blocked off.