Three people, including the gunman, died after Australian Police commandos entered Sydney's Lindt Café to bring an end to the hostage crisis.
The gunfight at the café, which is located in Martin Place in Sydney's financial district, also wounded four hostages, including a male police officer who suffered non life-threatening injuries to his face from gunshot pellets.
Approximately 17 people were taken hostage by Man Haron Monis, a self-proclaimed Iranian cleric, on 15 December and were forced to hold up a black flag with white Arabic writing against the café's windows.
Five managed to flee within a few hours of the siege, while another seven escaped minutes before armed policemen entered the building.
According to local media reports, Monis was a known extremist and criminal, and was on bail facing a number of charges, including being an accessory to the murder of his ex-wife.
The 50-year-old was granted political asylum in Australia in 1996.
Australian Prime Minister Tony Abbott said: "As the siege unfolded yesterday, he sought to cloak his actions with the symbolism of the ISIL death cult.
"These events do demonstrate that even a country as free, as open, as generous and as safe as ours is vulnerable to acts of politically motivated violence but they also demonstrate that ... we are ready to respond.
"Australians should be reassured by the way our law enforcement and security agencies responded to this brush with terrorism."
Meanwhile, the New South Wales Police department has started a probe into the incident.
In September, Australia raised its threat level to high and remains on high alert for attacks by home-grown militants returning from fighting with the Islamic State (IS) in the Middle East.
The terrorist group has threatened Australia in the past, with its spokesperson Abu Mohammed al-Adnani releasing an audio message urging 'lone wolf' attacks abroad, specifically mentioning Australia, Al Jazeera reported.
The country is part of a coalition conducting air strikes against IS militants in Iraq.