A masked man broke into the home of a wealthy family, chained a fake bomb to a teenage girl's neck and left a note of demands behind as part of an elaborate extortion attempt, Australian police said today.

Madeleine Pulver was freed from the device after bomb squad specialists spent 10 harrowing hours trying to safely remove it from her neck. The 18-year-old was not hurt and police later determined the device contained no explosives.

A note of demands had been attached to the device, New South Wales state Police Detective Superintendent Luke Moore said, though he declined to specify what the demands were.

"We are treating this as an attempted extortion - a very serious attempted extortion," Moore said.

The drama began yesterday afternoon in the upmarket Sydney suburb of Mosman when Miss Pulver's family contacted police saying their daughter had been attacked and there was a strange device attached to her.

Bomb technicians, negotiators and detectives rushed to the scene. Nearby homes were evacuated, streets were closed and medical and fire crews waited nearby.

Miss Pulver told police a man wearing a mask broke into her home and confronted her while she was in the kitchen. She said the man forced her to stay still while he fitted the device to her neck, and then fled. When officials arrived on the scene, they found the teenager alone in the house with the suspicious device tethered to her neck by a chain.

The family lives in one of Sydney's ritziest areas and the girl's father, William Pulver, is a successful businessman who serves as the CEO of an information technology company.

Today he fought back tears as he talked about his daughter's horrifying ordeal.

"We as parents are extraordinarily proud of Maddy," Mr Pulver said, with his wife Belinda by his side.

"I think she has woken up this morning in pretty good spirits. She's a little tired, a little sore, from holding this damned device in place for about 10 hours."

Forensics officers spent last night combing through the family's three-storey home and scouring the surrounding streets for evidence.

Mr Moore said they had not identified a prime suspect and are trying to figure out how the man got into the house.

"We are treating this as an individual incident," he said. "We have absolutely no information to suggest this is linked to any other crime."

New South Wales state Police Assistant Commissioner Mark Murdoch said the device was quite sophisticated and was designed to look like a bomb as part of a "very, very elaborate hoax".

Prime Minister Julia Gillard said she was shocked when she heard about the case.

"When I looked at it this morning, the first thing I said was, 'It's like a Hollywood script - the kind of thing you would see at the cinema or on TV,'" Ms Gillard told Fairfax Radio. "You would never expect it to happen in real life in Australia."

Miss Pulver was examined and released from a Sydney hospital this morning.