The Melbourne terrorist, who shot three police officers and killed another man, hired a sex worker to hold hostage before sparking a two-hour siege.
Gunman Yacqub Khayre ordered the escort to the serviced apartments in Brighton, posing as a client.
In a bid to lure the police to the Bay Road complex, he tied up the prostitute and killed a male clerk, an Australian national born in China.
"At the scene, when this person's first arrived there, a man was shot, we believe, by the gunman," Victoria Police Commissioner Graham Ashton revealed on Tuesday morning.
“He was an employee of the serviced apartments, so he appears to have been in the wrong place at, unluckily, the wrong time.”
"Strong criminal history" revealed
Commissioner Ashton revealed Khayre was "someone that was known to us and has a strong criminal history".
He said Khayre came out of the apartment "with a shotgun and has commenced firing at police", wounding three officers.
Kharye was then gunned down when police returned fire.
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While holding the woman hostage a call was made to Channel 7 in which Kharye made a declaration on behalf ISIS.
Police allege the Chinese-born building receptionist "was fatally shot by the offender" before the gunman took up a position inside the apartment.
Counter terrorism police have investigated Khayre's background, with enquries ongoing.
The crime scene has been handed over to the coroner with homicide police assisting with the investigation, Commissioner Ashton added.