Melbourne police treating knife attack as terrorism incident, officials say

"Three people have been stabbed, unfortunately one is deceased at the scene, two other victims are now in hospital".

A police statement said: "Police are aware of an incident in the vicinity of Bourke Street".

The man stabbed three people, killing one, before he was shot by police.

Police shot the man in the chest after he charged at them with the knife.

The suspect died from his injuries half an hour after arriving at the hospital.

As the attacker's vehicle burst into flames, the man emerged and "engaged" with members of the public, Victoria Police Chief Commissioner Graham Ashton told reporters Friday.

Counter-terrorism police and intelligence officers are still piecing together how the incident occurred, but it is known the attacker drove a 4x4 truck loaded with gas bottles into the bustling city centre at around 4:00PM (0500 GMT) on Friday evening.

Friday's attack is a double blow for the city as it coincides with an ongoing murder trial of 28-year-old James Gargasoulas, whose vehicle ploughed into crowds in the same area in 2017, killing six people. He also died from his gunshot wound in hospital.

Mr Hair said the assailant was dressed in Islamic clothing and of African appearance and about six foot four inches tall.

"There is some minor offending history in relation to cannabis use, theft and driving offences", he said.

Ashton said the attacker was known to the authorities at the state and federal level, mainly due to his relatives who are persons of interest to police.

"At this stage we're still encouraging people to go to those events, and it's highly likely we'll have additional police at all of those events", he said.

Videos and photos shared on Twitter showed a burning vehicle and police officers in an altercation with the man clad in black.

Ambulance Victoria said paramedics had assessed three people at the scene.

It then showed a man approach two police officers with what appears to be a knife, and attempt to stab them.

"Passers-by were calling out that members of the public had been stabbed", he said. "Because he was on his stomach, they turned him over to see if he's alright, he was still alive", he said.

He stabbed three people before being confronted by armed officers who eventually shot him in the chest.

The next thing he saw was a "big dude punching into the police car".

It was brought under control within about five minutes, a Metropolitan Fire Brigade spokeswoman said.

Police have also urged the public to avoid the Street after witnesses describe a auto bursting into flames.

May said she was taking the tram into the city center when she heard someone shout "he has a knife".

Witnesses have described hearing a loud bang during the incident.

Vanessa Coleman