The 59-year-old victim was walking through a park in the Sydney suburb of Minto yesterday when he was stabbed several times.

He suffered serious wounds and remains in hospital in a critical but stable condition.

The suspect, Ihsas Khan, 22, allegedly attempted to stab an officer before he was arrested, police said. 

Khan was refused bail in the Parramatta Bail Court and his case was adjourned until Wednesday. He did not enter pleas.

Speaking at a news conference, New South Wales state police Deputy Commissioner Catherine Burn said of the suspect: "We know that this person has strong extremist beliefs inspired by ISIS (Islamic State).

"What made him actually act yesterday, we don't know. But hopefully, our further investigations will uncover that. It was deliberate. It was violent."

The suspect was not believed to be connected to any terrorist groups known to police, Ms Burn said, but stressed that the type of threat he posed was a new challenge to authorities.

"This is the new face of terrorism. This is the new face of what we deal with," Ms Burn said.

"There is an individual who, known to police for some matters, decides or for whatever reason, becomes inspired to act; they are able to get some basic capability and act.

"I think that there was concerning information about his behaviour... but not somebody that we would say is somebody who is front and centre in our work at the moment."

Prime Minister Malcolm Turnbull last week said the threat of a terror attack in the nation was "real" after IS' call to followers to target prominent Australian locations.

Officials say they have stopped 10 terror attacks in Australia in the past two years.