Pictured: Victim of Sydney stabbing identified as 24yo Michaela Dunn

The woman murdered in a vicious knife attack in Sydney has been identified as 24-year-old Michaela Dunn.

The university student was allegedly killed by 20-year-old Mert Ney on Tuesday in her Clarence Street apartment. 

Dunn's family issued a statement through the New South Wales police on Wednesday, requesting their privacy.

Dunn has been described as a "beautiful, loving woman who studied at university and travelled widely" by her mother in a statement to Nine News.

It is believed Ney rampaged through the Sydney CBD wielding a large kitchen knife, threatening street-goers while yelling. 

About an hour after his arrest, Dunn's body was discovered inside the nearby apartment. Police said on Wednesday she sustained a knife-inflicted laceration to her neck and was pronounced dead at the scene.

Dunn had been reportedly working as a sex worker. Initial inquiries by authorities indicated Ney had gone to her apartment for an appointment at 1:30pm. CCTV footage captured the man leaving around 20 minutes later.

Following Dunn's murder, Ney allegedly stabbed a 41-year-old woman in the back inside the Hotel CBD, later identified as Linda Bo by AAP. The woman was taken to hospital in a stable condition.

"You would say with confidence that he went on the street to kill more people, and the fact she's alive is a miracle," police commissioner Mick Fuller told media on Wednesday. 

Twenty-year-old Ney, from Marayong in western Sydney, was arrested on Tuesday after being restrained by several members of the public, who have been hailed as heroes. The civilians used cafe chairs and a milk crate to pin the accused to the ground.

Ney's sister, who has refused to give her name, spoke to media outside her home on Wednesday.

"I hate my last name," she told reporters.

"She [Dunn] could have been going out for drinks or shopping with her mum, having dinner with her boyfriend. And she can't do that now, can she?"

She claimed her brother had descended into insanity, and she wants him to "suffer".

Charges are expected to be laid against Ney at his bedside at Royal Prince Albert Hospital. He is expected to be charged with murder and serious assault.