Woman killed in knife attack in Sydney

A knife-wielding man shouting "Allahu Akbar' on Tuesday went on a stabbing rampage in Sydney's busy central business district, allegedly killing one woman and injuring another before he was overpowered by passersby with a chair.

The attacker has been identified as 21-year-old Mert Ney and is said to have a history of mental illness. Police said the incident was currently not classified as a terror act.

Australian TV channels showed the attacker running through the King Street with a large kitchen knife yelling Allahu Akbar (God is Great).

The attacker, who was seen jumping on the bonnet and roof of a Mercedes, stabbed a 41-year-old woman passing on the street in the back before he was held down with chairs and a milk crate by onlookers, police said.

Paramedics found the woman with a stab wound taking refuge in a nearby hotel.

Later, police said they found the body of a 21-year-old woman, believed to have been an acquaintance of the detained suspect, inside an apartment near the crime site.

Officers confirmed that the death was linked to the ongoing investigation.

"All the information we have at hand would link these two crimes," New South Wales police commissioner Mick Fuller said.

In a statement, police said that the emergency services responded following reports that a man was walking along York Street armed with a knife.

Fuller said the attacker had no known links to terror organisations, but he did have a thumb drive with details of mass-casualty white-supremacist attacks in the United States and New Zealand.

He said the accused "is by definition a lone actor. Information was found on him that would suggest he had some ideologies related to terrorism... but he has no apparent links to other terrorist organisations."

"It is not currently classed as a terrorist incident... As investigation continues we will reassess that," Fuller said.

Officers from Sydney City Police Area Command and various specialist police were conducting patrols in the area, but it is believed there is no further threat to public safety, the police said.

Prime Minister Scott Morrison praised the bravery of the onlookers.

"The attacker is now in police custody following the brave actions of those who were present at the scene and were able to able to restrain him," he said in a tweet.

"Our thoughts are with all those who have been impacted by this violent attack," he said.