One person has been killed and two others injured in a shooting at a factory on the outskirts of Sydney. Police are responding to a potential ongoing hostage situation as the suspect, allegedly armed with an automatic weapon, remains on the loose.

Police have confirmed that an operation is underway in response to the incident in which at least three people were shot.

"Negotiators and a tactical response team are at the scene and trying to gain access to the building," a police spokeswoman said, according to Reuters.

Local news stations report that businesses have been placed into lockdown and a one kilometer exclusion zone has been established.

A tactical operation unit has surrounded the facility, where the suspect is believed to be holed up. It was not immediately clear if there were other people inside the building.

According to AAP there were two victims. One has been shot in the leg and the other in the shoulder. They were taken to Liverpool Hospital.

According to a Sky News reporter, the shooter is still believed to be inside the building, where witnesses reported hearing up to five shots.

“Some radio stations are saying it is a domestic incident - but there is nothing official at this stage,” Greg Byrnes reported. “We have had nothing from police to suggest it is a more sinister incident.”

"A police operation is continuing at the business and a perimeter has been established," the police spokesperson said. "While the operation is confined to one area, members of the public are advised to avoid the area."

(RT)