A manhunt was under way Thursday for an attacker who attached what turned out to be a fake bomb to a terrified Sydney teenager in a drama described as "like something out of a Hollywood movie script".

Madeleine Pulver, 18, a member of one of Sydney's wealthiest families, endured a horrifying 10-hour ordeal after a masked man strapped a device around her neck at her home in the exclusive suburb of Mosman.

A note was left at the scene in what was thought to be an extortion attempt.

"Certainly the instructions were precise, they were such that led us to believe that we were dealing with a very serious and legitimate threat," Mark Murdoch, assistant commissioner of New South Wales state police, said.

Nearby properties were evacuated and roads were closed off in an operation involving the bomb squad, rescue squad, fire crews and paramedics.

The device, attached to Pulver by a chain, was eventually removed before midnight on Wednesday and she was reunited with her parents.

Police on Thursday said it was "a very, very elaborate hoax".

"But it was made and certainly gave the appearance of a legitimate improvised explosive device," Murdoch said.

"We had to treat it seriously until we could prove otherwise and that's exactly what we did and that's why it took so long."

Murdoch declined to say if the incident had been an extortion attempt.

"We haven't made any contact with who's responsible but hopefully that doesn't remain the position too much longer. We want to get our hands on who has done this," he said.

"Certainly the family are at a loss to explain this, but you wouldn't expect someone would go to this much trouble if there wasn't a motive behind it."

Prime Minister Julia Gillard said the incident was like the plot of a film.

"When I looked at it this morning the first thing I said was 'it's like a Hollywood script, the kind of thing you would see at the cinema or on TV'," she said.

"You would never expect it to happen in real life in Australia."

Two police negotiators stayed with the schoolgirl throughout the ordeal, keeping her calm while bomb disposal technicians worked on the device.

"She's been kept in a very uncomfortable position for in excess of 10 hours, so she has been and will be uncomfortable for some days to come," Murdoch told reporters.

"But she's in good hands, she's with mum and dad, who are the most important people to be with."

Mosman is a wealthy suburb on Sydney's north shore and the teenager's father was named by several media as William Pulver, a successful businessman who is chief executive of Appen Butler Hill, a linguistic solutions software company.

Murdoch said it was too soon to speculate on what the motive might have been.

"The family have endured something no one needs to endure... but they have held up remarkably well."

The investigation was being led by the state's robbery and serious crime squad, which deals with extortion, and several other agencies, including the British military were asked for advice on the device.

"This is an unusual situation for New South Wales and Australia, I'm not aware of anything like this happening in the country before," the police chief added.