A man was shot by police after setting his vehicle on fire and stabbing three people and killing one in the city's central business district.
A large crowd of people also stood and filmed the man's confrontation with police.
The officers appear on the defensive for the length of the video, stepping away from the man as he continues to advance on them.
"A second person has been taken to hospital with a head injury".
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"In the midst of tragedy, you can find such pride in the work of by-standers to come to the aid of others", said Victorian Premier Daniel Andrews. Nearby police arrived shortly at the location and the man, wielding a knife, attempted to assault police officers.
"Police are now at an incident on Bourke St in the CBD".
The officers were seen trying for at least a minute to detain the man peaceably as his attacks on them continued, before one office shot him with a weapon.
Other footage shows a bloodied body lying in the road as devastated bystanders battle to save the person's life.
A Victoria Police spokesman confirmed one person had died and three people in total had been stabbed this afternoon. Another man tried to ward him off with a traffic cone.
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Later in the evening, witnesses were being taken to Melbourne West police station in police vans, some looking quite shaken. The man was arrested at the scene and has been taken to hospital under police guard. Police were investigating the incident in Melbourne as suspected terrorism, and they were re-evaluating security plans for upcoming public events.
"But certainly we are treating it as a terrorism incident".
According to them, the police initially responded to a report of a auto on fire near the corner of Swanston Street about 4.20 pm (10.50 am IST).
Ashton declined to identify the attacker but said he was from Somalia and known to police.
About 6pm, Victoria Police Superintendent David Clayton holds a press conference just metres from where the incident unfolded. A bomb squad rendered them safe without any exploding.
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A Marseille fire brigade spokesman told CNN the cause of the collapse of the five-and six story buildings is not yet known. The neighbourhood is home to many buildings in a similarly dilapidated condition, some of them run by slum landlords.
The street where the auto caught fire is the same one when in January 2017 a fatal but not terror-related incident when a man plowed his vehicle in to pedestrians at a high speed, killing six people and woulding about 30.