William Crews, a 26-year-old detective-in-training, was taken to Liverpool Hospital after he was shot in the head with a .22 calibre rifle. He was pronounced dead at 12.30am today.

Mr Crews, a detective senior constable originally from rural Australia, was involved in a raid on an apartment building on Cairds Avenue, Bankstown, about 9pm. Officers were executing a search warrant for drugs when a number of shots were fired.

A group of people inside the building opened fire and the officer was shot, sources said.

Five people were initially arrested, while police had to negotiate the surrender of another three suspects. They were all taken to Bankstown police station for questioning.

Counter-terrori sm experts were sent to the scene. There were also state protection group (SPG) officers, hostage negotiators and members of the dog squad.

Bankstown was a sea of blue and red lights as police from multiple commands cordoned off an extensive area around the siege.

Police started reducing the cordon about 1am, but the street still remained blocked off this morning.

One resident from Cairds Avenue, who did not want to be named, was shocked to hear the news, just after 11.30pm on his way home from work. ''I walk down this way every day … I'm quite a bit scared now.''

A neighbour said this morning that police had told them very little.

She said she was left terrified by last night's incident.

"I just went out on my balcony to see what was going on and my neighbour said to me 'get down, get down, get inside'.

"It was very noisy, but we don’t know what happened."

The woman, who did not want to be named, said the street was not considered safe.

"I never feel safe in Bankstown ... there seems to be a lot of crime."

Gus, who works at a nearby mixed business, said barely anyone knew what was going on.

He said: "It was crazy. There were police everywhere, helicopters, special police squads, everyone."

He said Bankstown was a safe suburb.

People on the social networking site Twitter said they had seen dozens of police cars and emergency vehicles at the scene. Several posters urged others to stay indoors and lie low.

Anyone who witnessed the incident or has information is urged to contact Crimestoppers on 1800 333 000.

with Paul Tatnell