Bourke Street incident: One dead after Melbourne knife rampage

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Australian police on Friday said they were treating a deadly knife attack in Melbourne as an act of terror, adding that the suspect was originally from Somalia and was known to intelligence authorities.

The attack during the afternoon rush hour brought the centre of Australia's second largest city to a standstill.

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

Ambulance Victoria said three people were injured at the scene, including one person who suffered a neck injury and is in a suspected critical condition.

Chief Commissioner Graham Ashton says the Somalian-born Shire Ali was the brother of a man arrested by police late past year in relation to committing acts in preparation for a terrorist attack.

"From what we know we are treating this as a terrorism incident", he said at a press conference.

In a statement police said a man was arrested at the scene and has been taken to hospital in critical condition.

"The investigation is ongoing and we are keeping an open mind", he says. The video also shows another individual, dubbed "trolley man", quickly barging in with a trolley directly hitting the attacker and stalling him to buy the police some time.

Twitter user Meegan May wrote: "Guy seems to have set his auto on fire, then attacked police with a knife".

One of the cops then shoots him. Police were investigating the incident in Melbourne as suspected terrorism, and they were re-evaluating security plans for upcoming public events.

He said another person died at the scene and two others are still being treated.

The suspect was shot by police and died from gunshot wounds in the Alfred Hospital.

David Clayton, police superintendent of Victoria state, told reporters that police had arrived at Bourke Street, a busy shopping thoroughfare, in response to a auto fire.

The area has since been cordoned off by the bomb squad.

A driver who rammed into pedestrians at a mall close to Friday's incident killed at least four people in January of previous year.

The militant "Islamic State" (IS) group claimed Friday's attack on the group's Amaq news website, saying that one of its fighters carried out the attack.

Victorian premier Daniel Andrews posted an update on the situation himself, urging people to "please avoid the area and always follow the instructions of emergency services personnel".