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

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Two men shopping in the area told the ABC they saw a man throw what they thought to be a bomb into his auto.

As police officers reached the scene they were confronted by a knife-wielding man who tried to attack them.

The other two victims, both men, are recovering from non-life-threatening injuries, Mr Ashton said.

Two others remain in hospital.

Police had been called to the auto at 4.20pm Friday, local time, by which time the man had already started attacking bystanders.

"As they got out of the vehicle, they were confronted by a male brandishing a knife and threatening them", Supt David Clayton said in a news conference.

"At the same time passers-by were calling out that members of the public had been stabbed", he added.

A total of three people were stabbed during the assault, police revealed during a press conference. However, video posted to Twitter and broadcast on television showed a man repeatedly swinging an object at two police officers.

After taking several swings at one of the officers, the attacker was shot in his chest.

He was said to have extremist links and had run-ins with local police over drug use and theft, according to media reports.

A burnt vehicle is pictured at the crime scene following a stabbing incident in Melbourne on November 9, where one person was killed and two others injured in a rush hour stabbing incident.

"A small number of people are being treated for stab wounds".

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He then stabbed three men, with one aged in his 60s dying at the scene.

He was taken to hospital in a critical condition and kept under guard before succumbing to his injuries.

Another civilian in a blue shirt tries to help police by grabbing a wooden outdoor chair.

Moments earlier, a vehicle burst into flames on the busy strip about 4.20pm.

Witnesses reported a loud explosion from the vehicle, which burst into flames before a man emerged and began attacking people with a knife in the street, police said.

The Age is reporting the man was shot by police.

"The exact circumstances are yet to be determined". The City of Melbourne is in the process of installing bollards to block traffic access to pedestrian malls.

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

Two officers got out of the auto and attempted to engage him.

They said they heard screams and cries from the crowd before they were rushed from the area.

We're live with Superintendent David Clayton following an incident on Bourke Street in the CBD this afternoon.