An immigration spokesman said the man died shortly after midnight at Sydney Immigration Residential Housing -- a family compound adjacent to the Villawood detention centre in western Sydney.
"The detention services provider called an ambulance late last night," the spokesman told AFP.
"The circumstances of the client's death are under investigation and the department will cooperate fully.
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The death comes as leaders from 54 Commonwealth countries, including Sri Lankan President Mahinda Rajapakse, arrive in Australia for a summit set to discuss the plight of asylum-seekers and other human rights issues.
Refugee advocates said the man, an ethnic Tamil aged in his mid-20s, had been granted asylum in Australia several months ago but was awaiting a background security check before he could be freed.
He had been in detention for a little more than two years and had repeatedly requested permission to live in the community while his application was processed, according to Ian Rintoul from