Police in Sydney are negotiating with a shirtless man wearing a barrister's wig who is holding a child at a courthouse in a suburb of Sidney and is in possession of a backpack which he says contains explosives.

Sources say the siege started minutes before 9 am, after a man and his daughter thought to be around 11 years old entered the barristers' chambers in Parramatta, a suburb about 20 kilometres from central Sydney.

The receptionist, Betty Hor told journalists the man asked for a person she had previously not heard of. According to Hor, after she could not find a person with that name in the building, he became upset and angry, even throwing a book at the reception desk.

"He said, 'Call the attorney general, I've got a bomb in my backpack" she said.

Hor called the police but by the time they had arrived, the man had locked himself and his daughter in one of the offices.

Aware that the police was surrounding the building, the man appeared on a window of the building, shirtless and wearing a barrister's wig, which he took off before spiting on it and giving the thumbs down sign.

Several hours later he smashed a window with a bottle and reportedly told the police: "I don't care if I die".

Five hours after the siege began armed police entered the building while ambulances, paramedics and fire engines were on standby outside.

New South Wales State Police Assistant Commissioner Denis Clifford told reporters that the man's claims of having a device were a matter of ''great concern'' to the police and while the man appeared several times at the window, there was no sign of the girl.

"We're working through those demands with him and we're doing the best we can to secure a peaceful resolution," Clifford told journalists.

"The fact that he's there and he's made certain threats is obviously of concern to us."