Three People Confirmed Dead Following Bourke St Incident

Three people, included a young child, are dead and more than 20 others injured after a man deliberately drove through a crowd in Melbourne's Bourke St mall.

Chasing police fired gunshots at the driver, who had bullet wounds when he was arrested after the car crashed on William St at around 2pm on Friday.

He was seen lying on the ground dressed only in red underwear and white shoes with police standing over him.

The mangled wreckage of half a pram was stuck on the bonnet of the car, while what appears to be the other half is around 100 metres further up the mall at a pedestrian crossing.

Four children have been admitted to the Royal Children's Hospital, one iin a critical condition.

Police say the man was involved in a stabbing and hostage situation earlier in the day, where a woman escaped from his car on the Bolte Bridge.

They say it is not a terror-related incident.

The car was seen circling the intersection of Flinders and Swanston streets outside the Flinders St railway station minutes before racing up Swanston St and turning into Bourke St.

Police say the driver was involved in a stabbing in Windsor in Melbourne's inner southeast in the early hours of Friday and a hostage situation on the other side of town where a woman escaped from his car on the Bolte Bridge.

Emily Cousins told AAP she saw police trying to stop the car during the hostage situation in West Melbourne at 11.45am on Friday.

"Three to four response guys jump out with tasers or guns yelling 'don't move'," Ms Cousins said.

"Then the red car turns across in front of my car and the front passenger ... jumped out of the moving vehicle."

Witnesses reported hearing at least five gunshots before the man was arrested after ploughing into people in the mall.

"There's someone on the middle of the ground and there's blood all over the street," Rishi Hathiramani, a CBD shopkeeper, told AAP.

"I've seen accidents but never this bad.

"It's pretty brutal."

Police confirmed they shot the man during the arrest, and that the wounds were not life threatening.

A number of CBD businesses went into lockdown, while others have been evacuated.

"A heap of people ran into my store, it was horrible. Half of my staff are in tears," a Strandbags manager told AAP.

City office worker William Mulholland said he came out of a laneway and saw a number of bodies lying on the pavement receiving CPR from police and emergency workers.

He said his friend came out of the RACV building on Bourke St and saw a body lying on the pavement in front of him.

One witness told ABC radio he saw the car travelling along the footpath.

"It was a maroon Commodore travelling easily 70km/hr on the footpath. We heard thumps and there was people flying everywhere," he said.

Another witness was in the Deloitte building on Bourke Street and saw a suspect under police guard.

POLICE STATEMENT: 

A man has been arrested following an incident in the CBD this afternoon. At this early stage it is believed a man driving a vehicle has struck a number of pedestrians in the vicinity of Bourke and Queens Streets just before 2pm. Emergency services are assisting multiple patients but at least one person has been confirmed deceased. Pedestrian access has been closed on Bourke Street between William and Swanston Streets. The exact circumstances surrounding the incident are yet to be determined and we will provide further information when it comes to hand. Police request that people avoid the area. The situation is now contained.