Speaking at a news conference, Chief Commissioner Graham Ashton said that the suspect had “family associations that were well known” to police and that he was also known to Australias security agency.
“We dont believe there is an ongoing threat at this stage, but certainly we are treating it as a terrorism incident.”
The 31-year-old attacker, who has not been identified, was originally from Somalia but lived in Melbournes northwest.
Witnesses said the man had parked a vehicle on Bourke Street, a busy shopping area in Australias second-largest city, before it was seen in flames.
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Person killed in stabbing attack in Melbourne, ISIS claims responsibility
It is not yet clear whether he deliberately set the vehicle on fire but Mr Ashton said it had been laden with gas cylinders.
Police had been called to the car at 4.20pm local time on Friday, by which point the man had already started attacking bystanders.
Earlier, Superintendent David Clayton had said that when police arrived, they were “confronted by a male brandishing a knife and threatening them”.
Officers were confronted near the burning car by a man “brandishing a knife and threatening them” while passers-by called out that people had been stabbed, he said.
“At the same time passers-by were calling out that members of the public had been stabbed,” he added.
Victoria Police Commissioner Graham Ashton said the suspect, originally from Somalia, was known to police and the incident is being treated as terrorism.
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.
Police said the man got out of a vehicle, which then caught fire, and attacked three bystanders with a knife before being shot by police.
Social media footage showed the attacker trying several times to stab one of the officers before a second officer drew his gun and a single shot was heard.
One dead, two injured in stabbing rampage in Melbourne
Sky News Australias Patrick Murrell said police had tried to “talk [the suspect] down and tried to use the Taser” before shooting him.
Islamic State has claimed the attack was carried out by one of its members, according to its propaganda agency Amaq. It provided no evidence, however.
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Melbourne stabbing being treated as terrorism; suspect dies in hospital: Police
A burnt out vehicle is seen on Bourke Street in Melbourne, Friday, Nov. 9, 2018. (James Ross/AAP Image via AP)
A knife attack that left one dead and two others wounded Friday in Australia’s second-largest city in the middle of rush hour is linked to terrorism, police said.
The standoff in Melbourne came after police responded to reports of a burning vehicle. Officers were confronted by a man “brandishing a knife and threatening them,” while passers-by alerted police that people had been stabbed, Victoria state police Superintendent David Clayton, said.
IS Claims Responsibility for Australia Attack
The suspect, who wasn’t immediately identified, was shot by police and later died at a hospital. Officers tried to “talk the suspect down” and used a Taser before shooting him, Sky News Australia reported.
The man, who was originally from Somalia, was known to the police and the incident is being treated as terrorism, Victoria state police Commissioner Graham Ashton said.
It wasn’t clear whether the man deliberately set the vehicle on fire, Ashton said. There were gas canisters inside the vehicle, according to Sky News.
The Islamic State terror group claimed responsibility for the attack through its propaganda wing, according to SITE Intelligence Group. However, terror organization didn't offer any evidence.
The two wounded stabbing victims were in the hospital. One had a head injury and the other suffered a neck injury, according to The Age. Their conditions weren’t made known.