Iran has condemned the 16-hour hostage crisis in Australia on Monday when an Iranian-born gunman held several people hostage inside the Lindt cafe in Sydney's Martin Place.

Calling it an act alien to Islam, IRNA news agency quoted the Iranian foreign ministry spokeswoman Marzieh Afkham who said: "Undertaking such inhuman acts and provoking fear and panic in the name of merciful Islam is not in any way justifiable.

"The psychological state of mind of this individual, who took refuge in Australia almost two decades ago, has been discussed several times with Australians officials, who knew his (mental) condition."

The 50-year-old Iranian gunman, Man Haron Monis, identified as Mohamad Hassan Manteghi by the Iranian media, was granted political asylum in Australia in 1996.

The "self-styled sheikh" who was a former Shiite cleric had a history of repeated violent offences and was on a bail after he was charged as an accessory in the murder of his ex-wife.

Iranian state media had also reported a month ago that Monis has declared his allegiance to the Islamic State (Isis) militant group.

Monis's former lawyer, Manny Conditsis, asserts nevertheless that IS had no role to play in the hostage crisis.

"This is a one-off random individual. It's not a concerted terrorism event or act. It's a damaged­ goods individual who's done something outrageous," Conditsis told ABC, reported Yahoo News.

Monis was amongst the three people who were killed early Tuesday (16 Tuesday) after police commandos stormed inside the Sydney café in an attempt to release the 17 hostages.