A 26-year-old man has been arrested after a vehicle deliberately struck down a number of pedestrians near Bourke Street Mall in Melbourne's CBD just before 2pm on Friday, police have confirmed.
Victorian Police Chief Commissioner Graham Ashton said "currently we have three people who have been confirmed deceased" as a result of the offender's driving.
He confirmed that a man and a woman in their 30s were killed, as was a 10-year-old child. They are not believed to be related.
More than 20 others have been injured.
Late evening on Friday, police confirmed a fourth person had died.
Four have been taken to Royal Children's Hospital including a three-month old who is in a critical condition and a two-year-old who is in intensive care in a serious condition.
Eleven were taken to Royal Melbourne Hospital. Seven have been taken to The Alfred Hospital.
Five of those hospitalised are in a critical condition and police fear the death toll will rise. Four others are in serious conditions and nine are stable.
The offender is now in custody and assisting police with their inquiries, Chief Commissioner Ashton said.
He confirmed the offender entered the city and drove in circles at the corner of Swanston Street and Flinders Street. He then proceeded up Swanston Street and turned left into Bourke Street and entered the mall.
"At that point, as we understand to date, that vehicle has commenced to hit pedestrians."
Victorian Premier Daniel Andrews thanked emergency services for their work "in the most difficult circumstances".
"They have supported the most vulnerable and [the police] have apprehended the person involved in this terrible criminal act.
He said he was proud about the way the public responded to this event.
"We can be confident that we are stronger than this evil criminal act," he added.
Witnesses said on social media they also heard shots being fired and saw emergency services speeding down the streets.
Chief Commissioner Ashton said police had earlier attempted to "intercept a vehicle which this person was driving", but "the pursuit had to be terminated because of the actions of the driver and concerns for the community in the area".
There was a woman in the vehicle at the time, with police are still trying to determine whether she was a hostage or why she was in the vehicle prior to the offender driving into Melbourne CBD.
Police said the offender drove "deliberately" into the crowd. Police said they shot at the suspect, who appeared to have been hit in the arm, and the injuries were non-life threatening, Chief Commissioner Ashton added.
Victoria Police cordoned off the scene and were urging people to avoid the area, however they indicated that the situation had been contained and that there was no ongoing threat to the public.
Earlier, Acting Commander Stuart Bateson said it was "not a CT [counter-terrorism] related incident".
Chief Commissioner Graham Ashton said the suspect was well known to police.
"We have mental health and drug-related issues in the background of this particular person."
He had come to their attention regarding family violence-related assaults in recent days.
The driver has been linked to a stabbing in Windsor in the early hours of Friday morning which left a man, believed to be his brother, in hospital in a critical condition.
"We do believe this is connected with an earlier incident in Windsor this morning."
"There was a car that just sped along the footpath and hit people," a witness told police at the scene.
Prime Minister Malcolm Turnbull offered his condolences.
"The prayers and heartfelt sympathies of all Australians are with the victims and the families of the victims of this shocking crime in Melbourne today," Mr Trunbull told media in Sydney.
"We thank and acknowledge the heroism, the professionalism of the police and the emergency workers, who rushed to the aid of the victims, joined by bystanders, who mindless of their own danger, sought to help those who’d been attacked in this shocking crime."
Opposition leader Bill Shorten extended his sympathies to the victims on Twitter.
Mr Bateson said the exact circumstances surrounding the incident were yet to be determined. Victoria Police and Premier Daniel Andrews have scheduled a press conference at 5.00pm AEDT.
The Australian Open has not been affected by the incident.
-With AAP