One person has died in an incident in Melbourne on Friday and two others are being treated in hospital after a man allegedly began attacking members of the public.

According to Superintendent David Clayton of the Victorian Police, officers were called to reports of a car on fire at the corner of Bourke and Swanston streets and upon getting out of the vehicle, they were "confronted by a male brandishing a knife and threatening them."

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

Video footage posted to social media showed a man swing a knife wildly at approaching police as two members of the public attempted to help the officers.

"Police shot the male in the chest and he is now under guard in hospital," Clayton said.

Meanwhile, fire units were able to extinguish the car flames and the state's bomb response unit is now clearing the area.

Police said they were not looking for any other offenders at this stage and that there is no known links to terrorism.

But Clayton said the investigation is still in its early stages and police will keep an open mind as to whether there is any links.

Police have advised the public to avoid the area.

The attack comes almost two years after a man killed four people on Bourke street in a vehicle attack.