Officials said they took the 52-year-old man into custody about 12 hours after the standoff began.
The man was holed up inside a family and criminal courts building with his 12-year-old daughter. Police said she was released unharmed.
At one point, the shirtless suspect was seen peeking through a window of the building, wearing the same kind of wig worn by judges and lawyers in Australian courts.
He also used a bottle to smash a hole in the window.
The suspect claimed to have explosives in his backpack, according to investigators.
They said the man issued several demands but declined to reveal details, and said they had not established his motive.
Tuesday's standoff came a month after an extortionist broke into a Sydney home and fastened a fake bomb around the neck of a millionaire's teenage daughter. She spent 10 terrifying hours with the device strapped to her before police determined it was harmless and freed her.
The Associated Press contributed to this story.