The Islamic State group says one of its fighters carried out a knife attack in Melbourne in which one died and two were wounded.

The group's Amaq news website provided no evidence for the claim.

"The one who carried out the ramming and stabbing operation in Melbourne (..) is one of the fighters of the Islamic State and he is carrying out the operation in response to (a call) to the citizens of the coalition," Amaq said on Friday ,

Abu Bakr al-Baghdadi to "use bombs, knives or cars to carry out attacks" in August in 2014 over parts of Iraq and Syria.

The attacker in Melbourne was shot by police in the center of Melbourne and stabbed three people, killing one. The attacker died later in hospital.

Police are now handling the stabbing attack in Melbourne's Bourke St as a terrorism incident.

The knifeman, a 31-year-old Somali-born from Melbourne's north-western suburbs, died in hospital on Friday night after being shot in the chest by police.

The Herald Sun, on its Twitter page, said the terrorist's wife "what has been radicalized". They say Victoria Police are searching for her.

In a press conference, Victoria Police Chief Commissioner Graham Ashton said the man who is being stabbed three people, killing one, is known to Victoria Police and federal intelligence authorities.

"We are now dealing with this as a terrorism incident," he said.

Commissioner Ashton revealed that he had come to Australia from Somalia in the 1990s and had a "terrorism perspective".

"He's got family associations that are well known to us," he said.

There were some reports that "Allahu Akbar" during the attack but Commissioner Ashton said this had not been confirmed.

The attacker had a record of some minor openings including for cannabis use, theft and driving open.

The man caused chaos in the Melbourne CBD on Friday afternoon after allegedly stabbing three men. One man, who is formally identified, died at the scene. Some witnesses say he was stabbed in the face.

A 26-year-old and a 58-year-old were taken to hospital with non-life-threatening injuries.

Police officers also received minor injuries, one of them was punched out, and some cuts and scratches.

Police have not revealed the identity of the attacker.

but The Daily Mail Has named the attacker as Mohamed Khalif, who reportedly goes by the name Hassan Shire.

media_cameraThe man confronts police in Bourke St this afternoon. Source: Chris Macheras.

Bourke St is in lockdown from Swanston St to Russell St and is expected to stay closed as late as 8am Saturday as police investigate.

The Herald Sun What is "doing ok given the circumstances". Rodney Patterson and his wife Maree

This is the second week in Melbourne.

Victorian premier daniel andrews condemned the incident and thanked the police and brave bystanders who had risked their lives to stop the knifeman.

"This is an evil, terrifying thing that's happened in our city and state today," Mr Andrew said.

"We condemn it. So we take this opportunity to thank those very happy and responsible members of Victoria Police. They've done each and every one of us.

"Equally, those strangers, people who were bystanders who knew no one involved, who stepped into a moment's hesitation, to render support and assistances."

Prime Minister Scott Morrison said he had been briefed on the incident and state and federal agencies were working together.

"I condemn the act of terrorism in Melbourne today that has tragically taken the life of a fellow Australian who has died as a result of this evil and cowardly attack," he said in a statement.

"Australians never want to be intimated by these appalling attacks and we will continue to go about our lives and enjoy the freedoms that the terrorists detest."

HOW THE ATTACK UNFOLDED

The incident started when the man drove a 4WD into the city about 4.10pm and it was set on fire. Commissioner Ashton confirmed there were some barbecue-style gas cylinders in the car.

It's unclear whether the car is set on fire before or after the left of the vehicle.

According to the ABC, witnesses saw the man crash the car, get out and throw an object into the car that set it alight.

Commissioner Ashton said after the car was set to fire.

The man then punched one of the officers through the window of the car. Two other officers got out of the car and attempted to engage him. One officer finally shot him once in the chest.

Footage on social media shows a man in a black and white pants with a knife. Two Bystanders Try To Help Officers Stop The Man, One Of Them By Rolling A Shopping Trolley In His Path.

RELATED: Trolley man praised for confronting knifeman

Vision of Victoria Police Officers confronting an armed man suspected of attack on Bourke Street

Police man with knife at Bourke Street

media_cameraVideo shows the man attacking police before he is shot. Picture: Twitter
media_cameraVideo shows the man attacking police before he is shot. Picture: Twitter

In an earlier press conference, Victoria Police Superintendent David Clayton said that they were called to the scene after a fire. When officers got out of the car, they were confronted by a male branding a knife and threatening them.

"Passers-by were called out of the public," he said.

One witness named Markel told ABC Local Radio in Melbourne that bystanders were urging officers to shot the man.

He was just going to shoot him, just shoot him. "A lot of bystanders were out and about.

Ambulance Victoria said he had been taken to hospital.

One had a neck injury and one suspected critical condition; the third person person was unknown.

Police have urged anyone who witnessed the incident or had happened to contact them.

media_cameraOne person was killed during the attack. Stuart McEvoy / The Australian.
media_cameraPolice are seen redirecting pedestrians away from an incident on Bourke Street. Picture: James Ross / AAP
media_cameraKnife-wielding man confronts police. Source: Chris Macheras.

Markel Villasin, 22, was finishing his shift at KFC on Bourke as the drama unfolded.

He and his colleagues have been waiting for him, he has said: "What are you talking about?" "He told AAP.

"I'm pretty sure he got stabbed in the face.

"I really wanted to help but I was in shock, I did not know what to do.

"Because he was on his stomach, they turned him over to see if he's alright, he was still alive."

Bystander Drew Hair told AAP he was walking on Swanston Street when he heard an explosion.

The next thing he saw was a "big dude punching into the police car".

Mr Hair said he was dressed in Islamic clothing and about six feet tall.

"The cops were trying to hit him with batons and he was not going down," he said. Mr Hair said he was involved as well as two police, trying to stop the man from his attack.

media_cameraSome of the people injured in the attack.

Melbourne resident Meegan May told news.com.au she was on a tram on Bourke St Andrew, about a block before the mall. She heard someone start screaming "he's got a knife".

She looked through the back window of the tram and noticed a car on fire. There is a man and two police officers trying to calm him down.

"A moment later, I heard a loud bang; to me it sounded like a gunshot, "she said.

An ambulance and about 10 police cars within moments.

A man told Sky News that it seems to be multiple explosions.

"There's one explosion and fire, then a second explosion and a massive fireball," he said.

Reports on 3AW radio indicate that witnesses saw the vehicle "throw something into the back", which then ignited.

An eyewitness speaking to 7 It has crashed and "exploded".

"I was walking up Bourke St … and we heard this loud explosion. I thought it was a car backfiring but there was something coming out of the car. It then veered to the left … and exploded in flames, "the woman said.

"People were running everywhere. I thought it was like last year so I started running. Everyone started running. It was so scary. "

Anyone with information or who witnessed the incident.

The incident continues as a trial into the 2017 rampage at Bourke Street.

In 2017, six people died in the terrifying car rampage that left the injured.

Four adults, one child and one baby died after James "Dimitrious" Gargasoulas allegedly ploughed his car through the busy pedestrian mall on January 20.

Zachary Matthew-Bryant, Tahlia Hakin, 10, Yosuke Kanno, 25, Jessica Mudie, 23, and 33-year-olds Matthew Si and Bhavita Patel, both died.

In September, that year's a knife-wielding one so went on a rampage outside Flinders St station. He was tasered and arrested in dramatic scenes in Melbourne's CBD.

In December, there is another incident when Saeed Noori allegedly drove a car into people crossing the intersection of Flinders and Elizabeth streets.

At least 18 people, including a four-year-old boy and international tourists, were hit by the car that afternoon and one of them, 83-year-old grandfather Antonio Crocaris, who died about eight days later.

Lifeline 13 11 14 or beyondblue on 1300 22 4636.

Originally published as Islamic State claims Melbourne attack

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