The 39-year-old man was allegedly in breach of his bail when police approached him on Robert Cram Drive about 11am Tuesday. Police will allege the man produced a knife and threatened them before running into a nearby house and locking himself inside.

Two females were inside at the time and one remained at the man's side throughout the standoff. Police say neither was being held against their will.

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The man repeatedly emerged from the townhouse at the centre of the police operation. He was unarmed and, from the first-floor balcony, spoke to police before returning inside with a woman standing close by.

An onlooker told the Mercury the man earlier emerged without pants and "waved his bum" at the street.

He was also seen to climb onto the balcony railing, and frequently appeared in an agitated state.

Witnesses told the Mercury that a bleeding wound to the man's face was the result of him earlier punching himself in the head "about 20 times".

Another agitated man was earlier cautioned and sent away by police after he arrived at the street on a motorbike, walked under the police tape and attempted to approach the house.

The man was heard saying the house belonged to his mother, who was on holidays.

He angrily confronted a female who appeared to be using a mobile phone to negotiate with someone inside the home.

The incident drew a large number of police and other emergency resources to the street and scores of residents and passers-by gathered to watch, including Phoebe Redman, 22.

"We just came down to check the surf down but we couldn't get through," Miss Redman told the Mercury.

"I've never seen anything like that before.

"There was a guy crazily running to the car and hitting his head on the back of the door, saying 'no effect'. It was a bit weird."

Part of Robert Cram Drive was closed to traffic throughout. Several cars were trapped in a car park at the beach end of the street before police arranged for them to leave via local parkland.

The man walked out of the home voluntarily about 2.30pm. He was arrested and yelled at the crowd as he was led into custody - "no effect" - before he appeared to headbutt the door of the police car.

He was taken to Wollongong Police Station. Police say investigations are continuing, and charges are expected to be laid.

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