Police gave no further information but Seven News said a man was in custody after arming himself with a knife and running through downtown Sydney.
Meanwhile, NSW Police on Tuesday afternoon said a man was in custody after a woman was stabbed in a hotel.
King Street is also closed between Clarence Street and York Street.
A woman's body has been found with her throat slashed in a unit near to where a horrifying stabbing incident in Sydney's CBD unfolded earlier.
"Inquiries are underway after the body of a woman was found in side a unit on Clarence street Sydney about 3.15pm today".
Police said the woman was in a stable condition and there were no immediate reports of other injuries, despite "a number of attempted stabbings by the same offender".
Ms Megan Hayley said a man with a large kitchen knife chased several people though a busy office district and "five or six others were chasing him behind, trying to stop him, they caught him and restrained him" with chairs and a plastic crate.More news: Tesla Model 3 auto explodes after hitting truck in Moscow
"They were significantly courageous people", Supt Wood said.
Police described the members of the public who acted first as "heroes".
"About 2pm (local time) emergency services responded following reports a man was walking along York Street, Sydney, armed with a knife", they said in a statement. Police said he used the Arabic phrase "Allahu akbar".
Video shows the man jumping onto a auto roof in the middle of the street before being restrained by members of the public with milk crates and chairs.
Supt Wood said the injured woman had been found inside a nearby hotel.
"I've even seen three undercover cop cars pull up and blokes running from them down the street", he said.
A NSW Fire and Rescue spokesman confirmed a crew was in the area and assisted police.More news: THE MORNING SHOW Official Teaser Trailer (HD) Steve Carrell, Jennifer Aniston
A heavy police presence remains at multiple crime scenes.
"So insane! A random dude just started stabbing people in the city right outside where we were having lunch", JackHuddo said on Twitter.
The brothers, fearing the man was conducting a terrorist attack, ran down to the street and began chasing the man, who was covered in blood.
"We had a window open to get some air in and then we just heard the commotion ... we looked out and saw him on top of a auto wielding a knife and we all just kind of reacted from there", said Mr Cuthbert.
"He ran all the way back to near my work where a lot of others had cornered him for the police".
Motorists have been told to avoid King St due to the operation.More news: Mohamed Salah makes injured fan's day with photo opportunity
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