The gunman who shot dead a police worker was a 15-year-old boy of Iraqi-Kurdish background who was thought to have acted alone.
"We believe that his actions were politically motivated and therefore linked to terrorism," NSW police Commissioner, Andrew Scipione told reporters in Sydney.
The victim has been identified as Curtis Cheng, who had worked in the NSW police finance department for 17 years.
Mr Scipione said police had no information to suggest the gunman posed "this type of threat".
"We're a long way from establishing a full picture of this man, his exact motivations still remain a mystery to us," he said
"We are exploring every avenue with regard to why he did what he did."
Premier Mike Baird described the events as "chilling".
"The shock of this event will be felt everywhere," he told reporters.
Mr Cheng was shot as he left work at the State Crime Command in Parramatta on Friday afternoon.
His killer was shot dead as officers returned fire.
A strike force has been established to investigate.
PM responds
Prime Minister Malcolm Turnbull has described the shooting as a "cold-blooded murder".
Mr Turnbull has urged Australians to go about their day normally despite the incident in Parramatta on Friday.
"This appears to have been an act of politically motivated violence so at this stage it appears to have been an act of terrorism. It is a shocking crime. It was a cold-blooded murder," he told reporters in Melbourne.
Mr Turnbull said Australians should know that governments and agencies are working together "seamlessly" to ensure the security of the country and its people.
They can't guarantee incidents won't occur but police and intelligence services are staying on top of these issues, he said.
The prime minister especially referred to the Muslim community, saying any efforts to blame or vilify would be utterly counterproductive.
"The Muslim community are our absolutely necessary partners in combating this type of violent extremism," he said.
Australian Prime Minister Malcolm Turnbull arrives at a press conference in Melbourne, Saturday Oct. 3, 2015. Source: AAP
