UPDATE: Police believe a knifeman shot at a Hornsby shopping centre was an escaped psychiatric patient from a nearby mental facility.

The man was reportedly babbling incoherently and shouting "Allahu Akbar" when police were called to the scene.

They believe he went missing from a psychiatric facility yesterday.

1.51pm: Four people injured in Sydney police shooting

POLICE have shot a 23-year-old man carrying a knife at a Sydney shopping centre in a conflict that injured three bystanders.

It is believed fragments of police bullets hit three shoppers as well as the knifeman, who suffered wounds to his abdomen, arm and leg.

Police were called to Westfield Hornsby about 11.50am following reports of a man wandering around with a knife, talking to himself.

In a statement, NSW Police said they attempted to speak to the man but fired a number of shots following a confrontation.

"As a consequence four people have sustained various injuries and have been taken to hospital," police said.

"A Critical Incident Team will now investigate all circumstances surrounding the incident, including the discharge of a police firearm.

"At this stage it is not known what has caused the confrontation.

"That investigation will be subject to independent review."

Police said there were conflicting reports as to whether the man had stabbed anybody.

The ABC reported a worker at a nearby cafe told ABC witnessed the shooting.

"I just heard some people, they were shouting together or they [were] fighting," he told the ABC.

"I heard the shooting, like three or two times.

"After that I walked outside and I found three old ladies, they were injured and bleeding, and then, I found another guy, a young guy, he's bleeding as well."

Police have called for witnesses to come forward.

They are not looking for any other offenders. -ARM NEWSDESK