Melbourne knifeman shot dead after killing one person, injuring two others

A vehicle can be seen on fire in Bourke Street Melbourne

Police raced to the scene after a pick-up truck auto became engulfed in flames at 4:39pm local time.

The cylinders did not explode and the fire was put out in 10 minutes, by which point the attack was over.

A man has been arrested after a deadly stabbing spree during rush hour in Melbourne's busy central business district on Friday.

Local media showed footage of a man slashing wildly at police officers before being shot.

Video posted on Twitter and broadcasted on television showed an officer raise his weapon and then a shot is heard before the attacker falls to the ground clutching his chest. "Unfortunately one is dead at the scene, two others are at hospital".

Commissioner Ashton said the man was known to police and the federal intelligence agencies.

It's also believed there were gas cyclinders in the vehicle that was set on fire.

The counter-terrorism command has taken a lead role in the investigation and police have set up a three-block-wide exclusion zone.

Police have since confirmed the man was shot in the chest and is in a critical condition.

He said security for large upcoming public events, including commemorations for Remembrance Day on Sunday, would be reassessed and possibly boosted. Sunday marks 100 years since the armistice was signed that marked the end of World War One.

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"Three victims have been located, two appear to have been stabbed to the upper body, the third has died at the scene", Victoria Police said in a statement.

The victims' identities have not be made public, but Ashton said all three, including the deceased, are men.

The Age is reporting the man was shot by police. Australia has been on heightened alert from 2015 for attacks by home-grown militants returning from fighting in the Middle East. He declined to identify the attacker, but said he was Somali with "family associations that are well known to us".

Witnesses said they heard a big bang and images appeared to show a auto on fire.

One runs a trolley over from the other side of the street and pushes it at the attacker who is lunging at police.

"He was fighting against the police, police tried to subdue him".

"This is an evil and terrifying thing that has happened", Victoria State Premier Daniel Andrews said alongside Ashton. A bomb squad rendered them safe without any exploding.

More than 100 police have swarmed on the area.

Friday's attack is a double blow for the city as it coincides with an ongoing the murder trial of 28-year-old James Gargasoulas, who ploughed his auto into crowds in the same area in 2017, killing six people.

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