Police were alerted by the 18-year-old schoolgirl, named in several media as Madeleine Pulver, said to be a member of one of Sydney's wealthiest families, in the exclusive suburb of Mosman.

It took bomb disposal experts 10 hours to free the girl from the "very elaborate, sophisticated" device, the Australian Associated Press (AAP) quoted Assistant Commissioner Mark Murdoch as saying.

Two police negotiators had stayed with her throughout the "very, very difficult" ordeal, he said, but she had not been allowed to speak to her parents for operational reasons.

She had done "a great job keeping her emotions in check," the Sydney Morning Herald (SMH) quoted him as saying.

Nearby properties were evacuated and streets cordoned off during the operation, AAP said.

"We still don't know if it was explosive," Murdoch as quoted as saying, declining to say if the incident had been an extortion attempt.

"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," he said.

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

The SMH said a balaclava-clad man had entered the house and placed the device on the girl.

Other reports said a ransom note was attached to her neck and it was a case of extortion, with the Sydney Daily Telegraph citing a senior police officer referring to the device as a "collar bomb.”

Madeleine's father was named by the SMH as Bill Pulver, chief executive of Appen Butler Hill, a linguistic solutions software company whose clients include Microsoft, IBM, Toshiba and Motorola.

Investigations were being headed by the robbery and serious crimes squad, which also deals with extortion attempts.

Mosman is a wealthy suburb on Sydney's lower north shore lined with million dollar homes.

The street where the incident happened is reportedly home to leading racehorse trainer Gai Waterhouse and ex-Australian rugby stars Phil Kearns and John Eales.