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The revelation comes after Victoria Police raided properties in Melbourne's north and west following yesterday's terrorism attack in central Melbourne, in which Shire Ali was shot dead after taking the life of another man.

Pellegrini's is closed over the weekend and remains under police guard, and members of the public have begun to place floral tributes have been placed in the window of the business.

At least two members of the public bravely stepped in to help police. "Nearly within a minute, Victorian Police officers were in attendance in an unmarked vehicle", Ashton said. One male person was in the vehicle. He at that time produced a knife and attempted to attack the police officers.

Two civilians became involved as well as two police, trying to stop the man.

After putting out the fire in the auto, authorities found what Ashton described as "barbecue-style" bottles of gasoline inside the vehicle, which prompted authorities to call the bomb response unit to the scene.

It said the man was an Islamic State fighter and had responded to IS calls for attacks in countries that are part of the worldwide coalition fighting the militants in Syria and Iraq.

Australian Federal Police acting deputy commissioner Ian McCartney told reporters today that Shire Ali was known to have held radical views and that his passport was cancelled in 2015. He moved to Australia in the '90s from Somalia, and had a record of "minor" offenses, including marijuana use, some driving offenses and theft.

The death cult said in a statement: "The perpetrator of the operation... in Melbourne... was an Islamic State fighter and carried out the operation... to target nationals of the coalition' fighting IS".

"Three people have been stabbed".

Khalif stabbed three men, with a man in his 60s dying at the scene and two others recovering in Royal Melbourne Hospital.

A white sheet covered the man as he lay on Bourke Street in the rain.

A 24-year-old man from Hampton Park and a 58-year-old Launceston man, said to be Tasmanian businessman Rod Patterson, were taken to hospital with non-life threatening injuries.

"Because he was on his stomach, they turned him over to see if he's all right, he was still alive", Markel Villasin, told Australian Associated Press.

"He was breathing and he was bleeding out".

A man, who then threatened officers with a knife, was shot by police and died in hospital, Graham Ashton, chief commissioner of police, confirmed.

But as the attacks continued unabated, eventually one officer opted for lethal force, shooting the suspect in the chest.

"It looks like he's attempted to ignite a fire in the auto, we believe at this stage with a view to igniting those canisters with some sort of explosion, but that didn't eventuate", Commissioner Ashton said.

A police officer inspects a body at the crime scene following a stabbing incident in Melbourne on November 9, 2018.

"This is an evil and terrifying thing that has happened", Victoria State Premier Daniel Andrews said.

"To all of our first responders, we extend our utmost gratitude".

"We send our love and prayers to the family, who suffered a great loss".