Australian police say they believe an attack by a knife-wielding man who stabbed two people, one fatally, in Melbourne is linked to terrorism.

The attack during the Friday afternoon rush hour brought central Melbourne to a standstill.

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. The suspect died later at a hospital.

Victoria state police commissioner Graham Ashton says the suspect, who was originally from Somalia, was known to police and the incident is being treated as terrorism.

The incident took place after police responded to reports of a burning vehicle. 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, Victoria state police superintendent David Clayton said.