TV networks showed police had blocked a main street outside what they identified as a Family Court building in the west of the city, with a fire truck also parked outside.
Police said they could not give any details on the situation but confirmed parts of a main street in Parramatta, a suburb about 20 km from central Sydney, had been cordoned off.
The man is reportedly holding an 11-year-old girl, believed to be his daughter, Australian Associated Press said.