An investigation would determine whether hostages were killed by the gunman or died in crossfire, Scipione said.
One of the victims was Katrina Dawson, a Sydney lawyer and mother of three children.
The other victim was identified in Australian media as the manager of the cafe, Tori Johnson.
Deputy Police Commissioner Catherine Burn said three women were treated in hospital for gunshot wounds and were in stable condition. A police officer was treated for shotgun pellet wounds and discharged, she said.
Monis has long been on officials' radar. Last year he was sentenced to 300 hours of community service for using the postal service to send what a judge called "grossly offensive" letters to families of soldiers killed in Afghanistan from 2007 to 2009. At the time, Monis said that his letters were "flowers of advice" and that "always, I stand behind my beliefs."
He was later charged with being an accessory to the murder of his ex-wife. He also faced a count of sexual assault against a woman in 2002. He was been out on bail at the time of siege.
Police were investigating whether he was the registered owner of the shotgun that he used.
Abbott said that the country's senior officials have raised the same questions among themselves as the public into how this could happen.
"How can someone who has had such a long and checkered history not be on the appropriate watch list? And how can someone like that be entirely at large in the community?" Abbott asked. "These are questions we need to look at carefully and calmly and methodically. That's what we'll be doing in the days and weeks ahead."
Questions about the standoff — including over Monis' motives, whether he made any demands or whether the hostages who fled the cafe escaped or were released — have yet to be answered.
The standoff that started around 9:45 a.m. stretched through the day and into nightfall with no apparent solution in sight. Police stormed the cafe around 2 a.m. Tuesday when they heard gunfire inside, said Scipione.
On Monday, Scipione said authorities had not confirmed whether the siege was related to terrorism. A black flag — thought to be the same one commonly used by the Syrian rebel group Jabhat Al-Nusra (the Nusra Front), an Al-Qaeda ally — was spotted draped in the café window.
Television footage showed several people with their arms in the air and hands pressed against the glass of the cafe's windows and two people holding up what appeared to be the group's black flag with white Arabic writing. The incident has raised fears in Australia, which has been on heightened security alert since September, when authorities said they thwarted a plot to snatch a random citizen for a public beheading.
Citing social media posts from hostages, Reuters reported that Monis asked to speak with Abbott. Australian authorities would confirm only that the Monis made demands, and officials asked the media to not report them.
Seven Network television news staffers watched Monis and the hostages for hours from a fourth floor window of their Sydney offices, opposite the cafe.
He could be seen pacing back and forth past the cafe's four windows. Reporter Chris Reason said the man carried what appeared to be a pump-action shotgun, was unshaven and wore a white shirt and a black cap.
"The gunman seems to be sort of rotating these people through these positions on the windows, with their hands and faces up against the glass," Reason said in a report from Seven's offices. "Just two hours ago, when we saw that rush of escapees, we could see from up here in this vantage point the gunman got extremely agitated as he realized those five had got out," he added.
Thousands of workers across Sydney were sent home early, and some of the city's major buildings were evacuated, including the Opera House, the State Library, Channel Seven the NSW parliamentary executive offices and criminal courts and several city legal chambers, according to local media. The U.S. consulate, which is in the cafe area, was also evacuated, according to a spokeswoman.
The Australian National Imams Council, commenting on the siege, said it "condemns this criminal act unequivocally."
The joint statement with the grand mufti of Australia said, "Such actions are denounced in part and in whole in Islam," adding that they awaited further information about the identity and motivations of the perpetrators.
Australia has been on high alert for attacks by citizens returning from fighting in the Middle East.
Earlier this year, Abbott responded to U.S. President Barack Obama’s appeal for support in the fight against ISIL by sending fighter jets and military personnel to the Middle East.
In September the government elevated its terrorism threat level to the second-highest one — from medium to high on a four-tier scale — with Abbott saying the change was made on the advice of the Australian Security Intelligence Organization.
At the time, the domestic spy agency’s chief said the terrorist threat level has been rising in Australia over the past year, particularly in recent months, mainly over Australians' joining the Islamic State of Iraq and the Levant (ISIL) to fight in Syria and Iraq.
Counterterrorism teams later conducted dozens of raids and made several arrests in Australia's three largest cities — Melbourne, Sydney and Brisbane.
Some Islamic leaders argued that Australia's Muslims — 500,000 people in a Christian-majority population of 23 million — are being unfairly targeted. Abbott has denied this.
One man arrested during a series of raids in Sydney was charged with conspiring with an ISIL leader in Syria to behead a random person in downtown Sydney.
ISIL threatened Australia before. In September one of the group’s spokesmen, Abu Mohammed al-Adnani, issued an audio message urging lone wolf attacks abroad, specifically mentioning Australia. Adnani told Muslims to kill all "disbelievers," whether civilians or soldiers.
Al Jazeera and wire services