A major police operation is underway in the Sydney CBD, following unconfirmed reports a man with a knife has been arrested.

There is a heavy police presence on King St and Clarence St in Wynyard.

People are being warned to avoid the area.

An uber driver who was on King Street near the Grace Hotel told 2GB Radio that he saw the terrifying incident unfold.

“Next thing I see this guy jumping over the car, over the bonnet … he had a knife in his hand,” the man said.

“He had a bit of blood on his shirt.

“There were police, people with their phone out, there were fireys trying to contain him.”

Witnesses say a fireman from a truck that happened to be at the scene leapt out with an axe in a bid to apprehend the man.

A NSW Fire and Rescue spokesman confirmed a crew was in the area and assisted police.

More to come.