The 15-year-old, who is of Iraqi-Kurdish background and was born in Iran, shot a New South Wales police finance worker with a handgun at close range as the man left work in the western Sydney suburb of Parramatta on Friday, police Commissioner Andrew Scipione said.
The teen then fired at responding officers, who shot and killed him, Scipione said."We are a long way from establishing a full picture of this man. His exact motivation still remains a mystery to us," Scipione said.
Scipione declined to release details on why police believe the teen's actions were prompted by politics.
Officials had not received any warnings that a shooting was imminent, he said.
Police did not release the shooter's name.The victim was Curtis Cheng, a 17-year veteran of the police force's finance department. He was shot from behind, and was likely unaware of the killer's presence, Scipione said.
"We are not sure whether he was targeted because he came from a police facility," Scipione said. "But he was certainly targeted in terms of the shooting. It was a direct shooting. Certainly wasn't a ricochet. It was a targeted shot that took his life."
Prime Minister Malcolm Turnbull has described the terror-related shooting of a NSW police force member by a 15-year-old boy as a "cold-blooded murder".
Mr Turnbull has urged Australians to go about their day normally despite the incident in Parramatta on Friday.
"This appears to have been an act of politically motivated violence so at this stage it appears to have been an act of terrorism. It is a shocking crime. It was a cold-blooded murder," he told reporters in Melbourne.
He said Australians should know that governments and agencies are working together "seamlessly" to ensure the security of the country and its people.
They can't guarantee incidents won't occur but police and intelligence services are staying on top of these issues, he said.
The Prime Minister especially referred to the Muslim community, saying any efforts to blame or vilify would be utterly counterproductive.
"The Muslim community are our absolutely necessary partners in combating this type of violent extremism," he said. Noting it was AFL grand final day, Mr Turnbull said Australia must go on.
"We have challenges, terrorism is one of them. But they must never divert us from our commitment to being free Australians, working together to ensure we achieve our common goals."

