SYDNEY - Police have entered a building in Sydney's west where a man has been holding his young daughter hostage, local media reported on Tuesday.

Heavily armed police officers moved into the building which houses Arthur Phillip Law Chambers, a law firm, shortly before 2: 00 pm (local time) on George Street in the Sydney suburb of Parramatta, the Australian Broadcasting Corporation (ABC) reported.

Police told reporters the operation is focused on convincing the man to release his daughter from the legal office on the second floor of that building.

A receptionist at the chambers told the ABC the man entered the chambers just before 9:00 am (local time) and asked to speak with a man.

When she told him there was no person of that name working there, he took his daughter into a barrister's office and locked the door.

He told the clerk that he had a bomb in his backpack and asked her to call the Attorney-General's department.

New South Wales Police have been negotiating by telephone with the man, who is aged in his 50s.

"He had made threats in relation to a backpack," Assistant Commissioner Denis Clifford told reporters.

"We have police negotiators on the scene. They have been talking to the man for some hours now. He had made a number of demands."

Clifford declined to say what the demands were, but said police were working through the demands with him.

"We are doing the best we can to secure a peaceful resolution," he said.

"The concern is that (his daughter) is in a situation where we have got somebody with a backpack," he said.

"We don't know exactly what is in that backpack. We have to assume that what he is saying is true at this stage."