How bedlam unfolded on Melbourne's Bourke Street on a Friday afternoon

How bedlam unfolded on Melbourne's Bourke Street on a Friday afternoon

How bedlam unfolded on Melbourne's Bourke Street on a Friday afternoon

Officers were confronted by a man "brandishing a knife and threatening them", while passers-by alerted police that people had been stabbed, Victoria state police Superintendent David Clayton, said.

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

Police said three members of the public were stabbed, one of whom died from their injuries at the scene.

Bystander Drew Hair told AAP he was walking on Swanston Street when he heard an explosion.

Mr Hair said two civilians became involved as well as two police, trying to stop the man from his attack. "The area has been cordoned off", police said.

It has now been confirmed one person has died.

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Police are treating the incident as a terror attack.

"We thank our police, those who came to assist them", he said.

It's at this point, with the attacker slashing at the police, one of the officers has enough time and space to shoot him once in the chest.

The officers ultimately fired a shot, causing the man to fall down.

Police warned people to avoid the area and created a three-block-wide exclusion zone as the bomb squad was dispatched to secure the area and examine the vehicle after the fire was extinguished.

Police were investigating the incident in Melbourne as suspected terrorism, and they were re-evaluating security plans for upcoming public events.

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Forensic investigators combed through the scene late Friday, where the dead victim's body lay covered in a white plastic sheet.

'I heard a loud bang, I ran outside and saw everyone was running the other way, ' he told the Herald Sun.

Chilling footage uploaded to social media shows a man attacking police with a knife moments after the vehicle exploded.

"This is an evil and terrifying thing that has happened in our city and our state today and we condemn it", he said.

Warning sirens sounded after the attack and police sealed off the downtown area, usually busy with shoppers and diners on a Friday evening.

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