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Woman and children caught up in Epping siege

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 A man armed with a handgun is holding police at bay after barricading himself in a house in Melbourne's north with a woman and four children inside.

Heavily armed police are outside the house at Wedge Street in Epping attempting to negotiate with the man, 26, who has been inside the house for more than four and half hours.  

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Siege in Cooper Street, Epping

A man armed with a handgun is holding police at bay after barricading himself in a house in Melbourne's north with a woman and four children inside. Vision courtesy Seven News Melbourne.

It is believed the man attempted to exit the house at about 2pm on Friday but ran back inside as officers surrounded the property.  

Victoria police spokeswoman Natalie Savino said the man is wanted for arrest as part of an ongoing investigation by the Darebin Crime Investigation Unit. 

A neighbour, who requested anonymity, said residents were in "shock."

"It was horrible because there is a school just across the road from the house and it happened just as school was breaking," she said.  

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She said families and young children of St Peter's Primary School witnessed police surrounding the house.

Investigators have so far declined to comment on why the man was being arrested.

Police confirmed there are people inside the house but said they are not being held against their will.

Police have secured the premises and surrounding area and road diversions remain in place.

Ms Savino said there was no risk to the general public.

In another dramatic turn of events, police on the scene have arrested two people when a violent brawl broke out between three men in a nearby street.

It is not believed this incident is related to the unfolding siege. 

Specialist police including the dog squad and Special Operations Group are at the scene.  

Police also have drones circulating the property in an attempt to gain intelligence of the situation inside the house. 

Police are expected to be on scene for some time.

More to come.

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