SYDNEY (AFP) - People in Sydney, including tearful office workers and Muslim women in hijabs, laid flowers on Tuesday at the scene of a deadly siege, in an outpouring of grief and shock that this could happen in their easy-going city.

Nearby florist kiosks struggled to keep up with demand as wellwishers created a sea of bouquets in an impromptu memorial at Martin Place, the city square where the 16-hour drama unfolded.

"Just the fact that something like this has never happened before in Australia, and it just makes you feel so sad," said Tom Harris, who works on the Sydney Harbour Bridge, as he approached with a large bouquet.

"And I just feel so sad and just feel sorry for the poor people, especially at Christmas time."

Emotions were raw as Australia awoke to the news that the Lindt chocolate cafe had been stormed overnight by heavily armed police, ending the siege in the heart of Sydney's financial district.

Most of the hostages escaped but the cafe manager, 34, and a 38-year-old barrister and mother-of-three lay dead while six more people were injured, including three women with gunshot wounds.

The attack staged by Iranian-born Man Haron Monis, who also died, has rocked the country, with Sydney tabloid The Daily Telegraph conveying the national mood with its frontpage headline: 'Evil Strikes Our Heart'.

Social media was flooded with expressions of fear and dismay, and pictures of the distinctive city harbour and skyline emblazoned with the hashtag #prayforSydney.

"I will ride with you", read one note attached to a hand-picked bouquet in Martin Place, referring to the campaign for solidarity with the Muslim community that has seen tens of thousands tweet the hashtag #illridewithyou.

Flags on all government buildings were ordered to be flown at half mast. "I don't think I could be sadder," New South Wales state Police Commissioner Andrew Scipione said as he looked at the floral tributes in Martin Place, where many in the crowd stood wiping away tears.

"It just doesn't feel the same today. Martin Place is such a beautiful area but today I just feel numb," said onlooker Terri Lucia. "I just feel that we've lost something, something that I felt that we were protected from, and that's... so upsetting. I feel we lost our innocence yesterday."

'Completely innocent'

The nation has been on security alert for months, after police in September disrupted an alleged plot by Islamic State supporters to abduct and behead a member of the public.

Rather than the work of a terrorist cell, the cafe siege was staged by a self-styled sheikh facing dozens of serious charges including involvement in his wife's murder, and sex offences stemming from his time as a "spiritual healer".

But the shock of the bloodshed in the heart of the city, and the deaths of people who had been going about their ordinary morning ritual of buying a coffee on their way to work, was too much for many to absorb.

"That could have been absolutely anyone and... they've done nothing. They are completely innocent and to lose their lives, for those poor families, it's just really heart-breaking," Angelica Haifa told AFP.

Mirella Rigo, overcome with emotion, rushed through the crowd to embrace a Muslim woman laying flowers at the memorial to show her solidarity with the Islamic community. "It's heartfelt," she told AFP. "I think to make them see they are not responsible for this."

Mariam Veiszadeh from the Islamophobia Register said she had been moved by the response of ordinary Australians, many of whom had rallied to support the Muslim community.

"The tragedy that unfolded in Sydney yesterday has really brought Australians together - irrespective of our backgrounds, religious or racial identities," she told AFP after laying flowers at the site.