Islamic State claims Melbourne terrorist as its own

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"It looks like he's attempted to ignite a fire in the vehicle, we believe at this stage with a view to igniting those canisters with some sort of explosion, but that didn't eventuate", Commissioner Ashton said. The condition and injuries of the third person were not disclosed.

Police say there were no signs of panic during the attack, with many people standing and taking videos with their smart phones and others trying to render first aid to the fatally injured Malaspina.

He said: "Stranger and bystanders, who knew nobody involved, stepped in without a moment's hesitation.they too are people whose qualities make us all proud as well".

Earlier, Victoria Police Commissioner Graham Ashton said in a television interview that Shire Ali was known to authorities because of his brother, and also had driving, theft and cannabis offences.

UPDATE: A MAN has been shot by police after setting a vehicle on fire and allegedly stabbing a number of people in Melbourne's Bourke St.

"They ran into a cafe and locked themselves in a kitchen", he said. He succumbed to the gunshot wounds in the Royal Melbourne Hospital.

Police say they were called to the area about 4.10pm after receiving reports of a auto on fire near the corner of Swanston St.

The officers were immediately confronted by a man brandishing a knife and threatening them.

Three person were stabbed in the Melbourne CBD this afternoon and one person is dead, along with the knifeman. "Nearly within a minute, Victorian Police officers were in attendance in an unmarked vehicle". He then engaged with members of the public at that location, " he said.

No terrorist link has been made at this stage of the investigation, according to police.

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Video from the scene showed a man swinging a knife at two police officers near a burning vehicle before he was shot.

Prime Minister Scott Morrison said the national terrorism advisory remained at "probable", the midpoint of a five-tier system, and told reporters in Sydney that radical Islam was the issue.

"This is an evil and terrifying thing that has happened", Victoria State Premier Daniel Andrews said.

Her immediate thought was, "Oh no, not another Bourke Street incident", she said. "And I did that motion quite a number of times, but it just was not getting him down". "I just want to forget it", she said.

Hair said the assailant was dressed in Islamic clothing and of African appearance and about six foot four inches tall. I thought it was a auto backfiring but there was flames coming out of the vehicle.

"People were running everywhere. Everyone started running. It was so scary".

Witnesses say they heard one bang or multiple bangs and gunshots in the area, which was subsequently put on lock down.

IS, which often claims responsibility for such attacks, has also done so in this case, though it presented no evidence that the man had direct affiliations with the group.

Australia has been on heightened alert from 2015 for attacks by home-grown militants returning from fighting in the Middle East.

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