Melbourne Stabbing: Suspect dies in hospital

A man who set a car on fire and stabbed three people in the Australian city of Melbourne has died in hospital after being shot by police.

Authorities are treating the attack as a terror-related.

The attacker was shot after confronting officers on a busy city street, authorities said. He was taken into custody in a critical condition.

The two survivors are in the hospital, one reportedly in a critical condition. The suspect has not been named.

Witnesses say he drove a ute into the Target center at around 4.20pm. As the car went up in flames he attempted to stab people and fought with police and bystanders.

One person has been taken to hospital with a neck injury in a suspected critical condition, who was declared dead later. Two others were also injured, but their condition is not yet known.

Officers were initially called to reports of a car fire near Bourke Street, a busy thoroughfare, at about 16:20 local time (05:20 GMT).

"As they got out of the car, they were confronted by a male brandishing a knife and threatening them," Supt David Clayton said in a news conference.

"At the same time, passers-by were calling out that members of the public had been stabbed."

Police said the scene had been cordoned off, and it was being "made safe" by a bomb response unit.

Footage circulating on social media shows a vehicle, which appears to have crashed into shop fronts, on fire.

The suspected attacker was arrested at the scene and is under police guard in hospital. Police say they are not looking for anyone else at this stage.

People have been urged to stay away from Bourke St, Swanston St. and the Melbourne CBD.

While the authorities said that it was too early to say if the incident was terror-related, they said that- they are still keeping an open mind.