Shire Ali set fire to a pickup truck laden with gas cylinders in the centre of Melbourne on Friday and stabbed three people, killing one - popular restaurant owner Sisto Malaspina - before he was shot by police.
A auto was seen burning on the northern strip of Bourke Street near the Target store, and a man was shot by police after an alleged stabbing, according to the Age.
"We are now treating this as a terrorism event", said Victoria Police Chief Commissioner Graham Ashton, adding that the suspect is "someone that is known to us" and had been travelling in a 4×4 packed with gas bottles.
One of the stabbing victims was dead at the scene and two others were taken to a hospital.
Ashton said, however, that police did not believe there were any ongoing threats to the public.
The man was shot in the chest by police.
Police said at the time they believed he was an Islamic State sympathiser and was planning an attack Melbourne's central Federation Square on New Year's Eve in 2017.
The three passersby who were stabbed - all men - were all taken to hospital.
Photo from the scene showed crowds of people behind police barriers.
Police were treating the attack as terror-related at this stage, and counter-terrorism investigations were continuing into Ali's background.
Authorities say he exited the burning vehicle and began stabbing passersby.
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The incident is being treated as terrorism, police said.
Two officers got out of the vehicle and attempted to engage him.
Three people have been injured, according to Ambulance Victoria, while the man is in a critical condition and under police guard.
"They are in a suspected critical condition", paramedics said.
"Equally, those strangers, people who were by-standers who knew nobody involved, who stepped in without a moment's hesitation, to render support and assistance to the fearless members of the Victoria Police, they too are people whose qualities make all of us proud as well".
Victoria Premier Daniel Andrews has called the attack an "evil and bad thing".
"A moment later, I heard a loud bang, to me it sounded like a gunshot", she said. "Equally, those strangers, people who were by-standers who knew nobody involved, who stepped in without a moment's hesitation, to render support and assistance to the fearless members of the Victoria Police, they too are people whose qualities make all of us proud as well".
Bourke Street Mall, a pedestrian strip and shopping area popular with foreign tourists including Japanese, was previously the scene of vehicle rampage in 2017 that left six people dead.
Two members of the public came to the aid of police, one using a shopping trolley and another using a chair to try and stop the attacker.