Three men have been released without charge and a fourth remains in custody after raids in Sydney linked to a shooting outside a police station.
Curtis Chen was gunned down outside Parramatta Police Headquarters on Friday by 15-year-old Farhad Jabar, who was then shot dead by police.
The authorities believe the arrested men may have had knowledge of the shooting or had influenced Jabar.
The attack is being treated by police as a terror attack.
Local media have quoted police sources as saying they believe Jabar may have been recruited by the group to help them evade surveillance.
New South Wales state Police Commissioner Andrew Scipione has said Jabar had clearly been radicalised, but there was not enough evidence to keep the arrested men in custody.
"We've taken a lot of material during the course of these searches and that's going to take us a long time to go through," he told 2GB radio.
"It's incredibly frustrating for us."
Federal Justice Minister Michael Keenan said on Thursday it was a great concern that younger Australians were being targeted and groomed by radicals "in the same way a paedophile would groom a victim".
"They seek to identify vulnerable people... to carry out a terror attack in here in Australia," he told the Seven Network on Thursday.
Some of the men arrested on Wednesday were already known to police.
Most of the properties targeted in the raids had reportedly been raided by police in September last year, in a major anti-terror operation which uncovered an alleged plot to behead a random person in public, and drape them in the flag used by the Islamic State (IS) militant group.
But New South Wales Police Deputy Commissioner Catherine Burn said Jabar was not on the radar of security services. She said police "can't be monitoring every single person at every single second".
Friday's shooting came amid heightened anxiety in Australia about the influence of domestic and overseas radical Islamist groups.
Around 120 Australians are currently fighting with IS in Syria and Iraq, and almost 30 Australians are believed to have been killed, a spokesperson for the Minister for Justice told the BBC last month.
Officials are worried about the security implications of those who return home, and of those who support them.
More than 160 Australian passports have either been refused, suspended or cancelled on national security grounds.