Prime Minister Tony Abbott is worried about the influence of what he calls "an ISIL death cult" in Sydney after Rasoul Al Mousawi was shot outside a Shia Muslim prayer hall on Monday.
Witnesses said a group of men drove past before the incident, calling out pro-Islamic State slogans.
The prime minister said the shooting of a religious leader outside a Sydney prayer hall seems to have been influenced by Islamic State ideology.
Tony Abbott told reporters in Sydney it's important to absolutely reject the "ISIL death cult" influence.
"Obviously we saw the attack on two policemen in Victoria a month or so back," he said. "It seems there is an ISIL death cult influence on this shooting in Sydney in the last 24 hours or so.
"The important thing is for all of us to absolutely reject this death cult."
Religious leader Rasoul al-Mousawi received pellet wounds to his face and shoulder outside a prayer hall in Greenacre, in Sydney's southwest early on Monday morning. He is expected to undergo surgery on Tuesday.
The Shia Muslim centre in Greenacre allegedly received threats from IS supporters just hours before the attack.
Police said the 47-year-old was standing with his family outside the gated building just after 1am when shots were fired.
However, sources in the community have told SBS a factional dispute was the cause of the conflict, and police do not believe the incident is linked to IS.
But others are adamant that Islamic State supporters were involved and suggesting otherwise could cause upset.
"The police are in denial that this is an attack related to extremism in society," a Sydney community leader Jamal Daoud said. "We started to hear from some of the young people that they should take the law into their own hand and should retaliate, tit for tat attacks which would be very dangerous for society."
Community leaders acknowledge there is an ongoing dispute between two Shia groups. They said it is being resolved and would not have escalated to this level.
Earlier today, thousands took part in the annual Ashura march from Hyde Park to the Royal Botanic Gardens. Organisers took the opportunity to condemn the Greenacre shooting, vowing they will not be intimidated by Islamic State supporters.
"We are seeing Islam being hijacked again by ISIL [another name for Islamic State], but we are here to show that we are part of Australia and we share Australian values," said Basim Alansari, one of the rally's speakers.
Hussain Abbas, who also took part in the rally, said the Shia Muslim community wanted to show it would not be intimidated.
The Ashura Australia procession has been taking place in Sydney for the past 11 years to promote the message of peace and unite against oppression and injustice.
Police estimated about 2000 people took part in the march.
