Sydney woman Rachael Jacobs sparked off the trend after she reportedly told a Muslim woman who was removing her hijab to put it back on, saying "I will walk with you".
More than 40 Muslim groups in Australia have condemned the incident.
Earlier in the day, Twitterati poured out anger over the hostage crisis, with several posting anti-Muslim comments with the trends #Muslims and #Islamic.
3.45 pm (IST): The lights at the Lindt cafe have been switched off, and the police have refused to give the reason behind it.
According to The Sydney Morning Herald, a female hostage was seen turning off the lights at the cafe.
2.55 pm (IST) : Indian IT giant Infosys has said one of its employees is held hostage at the Sydney cafe.
2.45 pm (IST): "The lights in the cafe have just gone off," 7 News reporter Chris Reasontweeted.
2.15 pm (IST): The New South Wales police have activated Task Force Pioneer, which is usually done to address terrorism related incidents, The Sydney Morning Herald reported.
Hostages are being forced to hold the Islamic flag and are being used as human shields as the gunman moves across the windows of the Lindt Cafe in Sydney, according to local reporters.
"Hostages inside the Lindt cafe have been made to hold up an Islamic flag and used as a shield from police snipers," 7 News Sydney tweeted.When the 5 hostages escaped, the gunman could be seen from here getting extremely agitated, shouting at remaining hostages Chris Reason @ChrisReason7
1.35 pm (IST): "There is information that an Indian IT professional is among hostages in Sydney": Union Minister Venkaiah Naidu.
"There is some info that one of our Indian IT professionals is among those held hostage in the cafe. The external affairs minister is in touch with authorities concerned and trying to get information," Naidu said.
12.50 pm (IST): Hostages have told the media that the gunman has allegedly placed four bombs in Sydney's Central Business District, two inside the cafe and two others at undisclosed locations.
"Gunman has also told police there are 4 bombs - 2 inside the cafe and 2 in Syd CBD. This direct from 2 female hostages inside #tennews," Network Ten news presenter Matt Doran tweeted.
12.30 pm (IST): The gunman who has taken siege of a Sydney cafe has reportedly demanded that an ISIS flag be delivered to him for the release of hostages. He has also demanded to speak with Prime Minister Tony Abbott, according to Channel Ten News.
"Hostages inside café say the perpetrator needs #ISIL flag delivered directly... if that is done one hostage will be released," the channel tweeted.
"He needs the ISIL flag to be directly delivered to the cafe; And his 2nd request is to speak to the Prime Minster," it said in another tweet.
"The man inside the café said that if police could get him an ISIS flag, then he would release some hostages," a member of Sydney's Muslim community told The Sydney Morning Herald.
11.30 am (IST): Two more hostages have escaped from the Lindt Chocolate Cafe, as per reports. Two women were seen running out of the cafe, according to 7 News Sydney.
11.05 am (IST): According to the police, negotiators have established contact with the armed man who has taken several people hostage in a Sydney cafe.
10.18 am (IST): Three hostages have reportedly escaped from the Lindt Chocolate Cafe in Martin Place, Sydney, which has been under siege of at least one gunman.
The three, including one staff member and two customers, were seen running from the cafe on Channel 7 footage, according to The Sydney Morning Herald.
9.45 am (IST): The Grand Mufti of Australia and imams across the country have condemned the act.
"The Grand Mufti and the Australian National Imams Council condemn this criminal act unequivocally and reiterate that such actions are denounced in part and in whole in Islam," a statement said.
"His Eminence the Grand Mufti, the Australian National Imams Council and the Muslim community express their full support and solidarity with their victims and their families and aspire to a peaceful resolve to this calamity."
9.30 am (IST): Indian Prime Minister Narendra Modi condemned the Sydney hostage crisis incident. "The incident in Sydney is disturbing. Such acts are inhuman & deeply unfortunate. I pray for everyone's safety," he tweeted. The Indian consulate in Sydney has reportedly been shut.
9.20 am (IST): Lindt Chocolate Cafe Australia, which is currently under siege by at least one gunman who has held several people hostage in the cafe, said on its Facebook page -
"We would like to thank everyone for their thoughts and kind support over the current situation at the Lindt Chocolate Café at Martin Place. We are deeply concerned over this serious incident and our thoughts and prayers are with the staff and customers involved and all their friends and families. The matter is being dealt with by the authorities and we are waiting for any updates from them".
9.15 am (IST): Uber has come under criticism for introducing surge pricing in the middle of the hostage crisis that has led to a lockdown of Sydney.
It had said that fares will be as high as $100 minimum to "encourage" drivers to take passengers from Sydney's Central Business District.
Uber later issued a statement that all rides from the area will be free. " Uber Sydney trips from CBD will be free for riders. Higher rates are still in place to encourage drivers to get into the CBD," the company said.
9.09 am (IST): "We are being tested today, but we met that test head-on," New South Wales Premier Mike Baird has said.
"The police are being tested, the public is being tested, but, whatever the test, we will face it head-on and we will remain a civil, democratic society." Baird told the media.
A gunman has taken several people hostage in a cafe in Sydney, and an Islamic flag was seen on the window, leading to evacuation of all major landmarks in the area.
At least 20 people are believed to be inside the Lindt Chocolate Cafe in Martin Place in Sydney, where a gunman entered at about 9.40 am on Monday (local time) and is still to be apprehended by the police. Hostages were seen at the window of the cafe with their arms in the air.
An Islamic flag seen on the window has triggered fears of a terror-driven hostage crisis. The message it carried translates to mean ""There is no god but God and Muhammad is the messenger of God".
However, Andrew Scipione, police commissioner in New South Wales province, has said that they have not yet declared the incident as a terror-related event.
Some security experts have said the flag is not that of the Islamic State.
"The flag being shown in the window is not an Islamic State flag, nor one for the other best-known jihadist group Jabhat al-Nusra. Rather, it appears to be a Shahada flag, which represents a general expression of faith in Islam, though has been co-opted by various jihadist groups," national security correspondent David Wroe told The Sydney Morning Herald.
Terrorism experts believe that the flag could be symbolic of the terror group.
"Getting hold of an [Islamic State] flag would be quite difficult, and people will make do with what they have got," Greg Barton, a terrorism expert from Monash University, told the paper.
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