UPDATED: 4.12PM Police have thwarted an alleged Anzac Day terror plot by a teenage boy.

Officers from the NSW Joint Counter Terrorism Team arrested a 16-year-old in Sydney on Sunday night and charged him with planning a terrorist act, just hours before thousands of people began gathering at Anzac Day dawn services.

The boy was arrested near his Auburn home following an investigation by officers attached to Operation Vianden.

The teenager was due to face the Parramatta Children's Court on Monday but the case was adjourned until tomorrow. He will appear on one count of preparing for, or planning, a terrorist act. The offence carries a maximum penalty of life imprisonment.

"At this stage we believe it was one person by himself," NSW Police Commissioner Andrew Scipione told reporters on Monday.

"The risk from this particular threat has been thwarted."

Mr Scipione would not give any details of the alleged plot, saying it would become clearer after the boy's court appearance.

His home has been searched and a number of items examined.

His arrest comes a year after five teenagers were arrested in Melbourne along with a 14-year-old in Britain for allegedly planning terror attacks at Anzac Day events in the city.

Mr Scipione and Australian Federal Police commander Chris Sheehan said the Sydney boy's age was troubling.

"It is important for families to stay on top of what's happening, particularly as they see changes in behaviour," Mr Scipione said.

Mr Sheehan said family and friends were vital when it came to connecting with young people who may be susceptible to carrying out criminal acts that attract significant penalties.

"In Australia and around the world, the age of people radicalised is getting younger, with online grooming tactics similar to those used by sexual predators," he said.

Federal Justice Minister Michael Keenan described the alleged terror plot as "chilling".

"It's very disturbing when Australians are out there commemorating what is a very important national day for us, some people would think that's an appropriate time to target those services - I'm very worried about that," he told reporters.

Mr Keenan said while there was an emerging trend involving increasingly younger people being lured towards extremism, Australians should take comfort authorities had prevented possible attacks.

He joined NSW Premier Mike Baird and Mr Scipione in urging people to still attend Anzac Day events.

"My strong encouragement is if you are intending to go (to an Anzac service), go," Mr Baird told reporters after he left a dawn service at Sydney's Martin Place.