A man was shot dead on Monday by Australian police who ended a hostage crisis at an apartment in south eastern suburb of Melbourne where a woman was held captive and a body of another man was found.
Once the woman arrived at the address, Khayre killed the building's 36-year-old Chinese-Australian concierge and took her hostage.
One police officer was shot in the neck and ear and two officers suffered wounds to their hands, but none of the wounds was life-threatening, Mr Ashton said.
On Tuesday, the ISIS-linked news outlet Amaq reported that the Middle Eastern terror group has claimed responsibility for the attack, and called the gunman a "soldier" of the group.
'There have been too many cases of people on parole committing violent offences of this kind, ' the prime minister told reporters in Canberra on Tuesday.
"What is clear here is that we face a growing threat from Islamist terrorism in Australia in our region and around the world".
Victoria Police Chief Commissioner Graham Ashton said the gunman, believed to be Yacqub Khayre, was known to police and had a long criminal history.
Meanwhile, the bomb disposal squad and forensics police today searched the scene of the siege in Brighton suburb of Melbourne while officers were raiding the home of the gunman who killed one man Monday. He was recognised as a refugee under Australia's humanitarian migration program and later became an Australian citizen, police said.
However, Khayre was later convicted of armed robbery and was on parole at the time of the attack last night. The group has claimed responsibility for a wave of deadly incidents in the United Kingdom, including the weekend attack in London that left seven people dead and nearly 50 injured.
Police had earlier found the building's attendant shot dead in the foyer. Three police officers were also injured during the standoff.
Mr Ashton said Khayre had been on parole since being released from prison in November and "there was nothing wrong with his parole until yesterday".
Prime Minister Malcolm Turnbull said there were "very grave questions" about why Khayre was on the streets.
Victoria Police Deputy Commissioner Andrew Crisp said the man spoken to by negotiators inside the building came out about 6pm and opened fire, hitting three police.
So-called Islamic State also later said it was behind the attack via online media, but police said they did not believe the claim was evidence the attack had been planned. The gunman was acquitted in an investigation of a terrorism plot in New South Wales several years ago, but since then he was involved in "more general criminal offending", Mr Ashton said.
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