SYDNEY - A gunman thought to be armed with an automatic rifle killed one person and injured two others at a factory in south-west Sydney on Monday (March 7) before shooting himself, ending a seven-hour standoff.

The shooting happened at Inline National Signage in an industrial area at Ingleburn on Monday morning, Sydney Morning Herald (SMH) reported.

Police were alerted to gunfire just before 11am, with heavily armed tactical response teams surrounding a signage business, and shutting down nearby streets.

"On arrival police found three males, one deceased and two others with gunshot wounds," said Detective Inspector Mark Brett. "One is undergoing emergency surgery, the other has superficial wounds to the lower part of his body."

Reports said the three were brothers and it was a domestic dispute rather than terrorism-related.

After a tense six-hour standoff, three more people walked free from the building after specialist police moved in. It was not known whether they had been threatened by the gunman.

"The alleged gunman, 33, was also located deceased," New South Wales state police said in a statement.

Mr Shaun Cooper, who works at supplier Fred Tapping across the road, was quoted by local media as saying that two of his colleagues heard five shots fired.

"The cops were there within three or four minutes," he said, adding that he saw police removing one body from the Inline building, while another two people were dragged out.

An employee of Konecranes, which is opposite Inline,was quoted as saying that police had told them to stay inside their building while an operation was under way across the street.

In December 2014, a lone gunman and self-styled sheikh who claimed allegiance to the Islamic State in Iraq and Syria (ISIS) took 17 hostages at a cafe in central Sydney.

The gunman and two hostages were killed in the final minutes of the 16-hour siege.