A knife-wielding man yelling “Allahu akbar”, or “God is great”, has attempted to stab several people in Sydney, with one person taken to hospital, Australian police and witnesses said.

Witnesses say the man, wielding a long knife, attempted to stab multiple people near a busy junction on Tuesday.

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Police confirmed that another woman has been found dead in a nearby building. 

"Inquiries are underway after the body of a woman was found inside a unit on Clarence St in Sydney at about 3.15pm today," the spokesperson said.

"Officers from Sydney City Police Area Command are on the scene and will conduct inquiries into whether the incident is linked to an earlier stabbing at a hotel on the corner of Clarence and King streets."

A video of the man shows him being confronted by members of the public after leaping on top of a car.

The clip - circulating on social media - later shows him being forcibly restrained on the ground by members of the public and the emergency services.

He appears bloodied, and mentally disturbed. Warning - the clip contains very strong language. 

New South Wales Police said in a statement that a man was arrested, and that a woman was taken to a hospital in a stable condition.

It was unclear whether anyone else was injured.

A witness told reporters that the man was screaming comments about religion, before yelling to police that he wanted to be shot.

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Police said he used the Arabic phrase “Allahu akbar”.

Passerby Zak Barry said he saw the man fall down, adding: "and as he's falling he dropped a kitchen knife".

Paul O'Shaughnessy, 37, said his brother Luke, 30, saw a man with a balaclava wielding a knife.

The pair chased the man and then managed to get a grip on him with the help of a third person.

"Please avoid the area," police said on Twitter.

HeraldScotland:

Tejas Oza told SBS News he just finished a meeting nearby and arrived at the scene as police were arresting a man.

"Police were grabbing him and pushing him on the ground. I heard from people he had a knife in his hand and he was stabbing all these people before police caught him," Mr Oza said.

"I heard this man had basically come out of nowhere and started stabbing people who were having lunch."

He said the crowd was "shaken up, that's for sure".

Australian Prime Minister Scott Morrison tweeted his support for those affected by the incident, saying that the motivation for the man's actions had yet to be determined.