The so-called Islamic State has claimed responsibility for a terror attack in the Indonesian capital Jakarta that killed two people, and another five men who police believe have links to a fighter in Syria.

Fairfax Media are reporting three suspected terrorists with alleged links to the terror attacks in Jakarta have been arrested in West Java.

The suicide bombing and gunfight took place on Jl Thamrin, between a Starbucks coffee shop and a police post in the middle of a busy intersection.

The victims were an Indonesian and a Canadian, and a further 15 people and five police were wounded.

The injured include an Algerian, Austrian, German and Dutchman.

IS officially claimed responsibility later on Thursday, the Reuters news agency reported.

'A group of soldiers of the caliphate in Indonesia targeted a gathering from the crusader alliance that fights the Islamic State in Jakarta through planting several explosive devices that went off as four of the soldiers attacked with light weapons and explosive belts,' the group said in a statement.

A news agency affiliated to Islamic State also reported the group was behind the attack.

Jakarta Police Chief Tito Karnavian revealed the attackers were linked to IS in Raqqa, Syria, in particular an Indonesian named Bahrun Naim.

'He wants to be the leader of ISIS groups in Southeast Asia,' he said.

Following the Paris terror attacks, the International Crisis Group's Sidney Jones warned against complacency, highlighting a blog post by the ex-prisoner where he praised the Paris attacks and called on readers to take notes.

Before Christmas, and acting on intelligence from Australia and the US, Indonesian authorities disrupted a network planning ISIS-inspired attacks on police and New Year celebrations.

In their communications they were referring to 'a concert', believed to be a reference to Paris.

(Sky News Australia)