Nineteen people have been injured, with four including a 4-year-old boy in a critical condition, in a deliberate act which saw pedestrians mown down by a SUV in Melbourne, Australia during the Thursday evening rush hour.

A 43-year-old New Zealand man, who lives in Melbourne, was among the injured but has since been discharged from hospital, Victoria Police said in a statement on Friday.

Police have arrested the driver of the Suzuki SUV, along with a second man who was seen filming the crash and who was found with knives in his bag. The second man is not believed to have been involved in the incident.

At a press conference, police said the man allegedly driving the car in the Melbourne CBD was a 32-year-old Australian citizen of Middle Eastern descent, who was known to police. He was arrested by an off-duty police officer whose actions have been described as heroic.

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Police arrest a man who was in the Suzuki Vitara that mowed down CBD pedestrians.

Victoria Police Acting Chief Commissioner Shane Patton said the driver had a history of drug use and mental health issues. He is in St Vincent's hospital and is yet to be interviewed by police.

"Doctors will determine when he is fit for interview," Patton said. "We will be hoping to interview him at the earliest possible stage."

Patton said there was not yet any evidence or intelligence indicating a link with terrorism. The man was known to police in relation to minor traffic offences and a minor assault in 2010.

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Police inspect the SUV that drove into the crowd.

"​At this time we don't have any evidence or intelligence to indicate a connection with terrorism," Patton said.

The Homicide Squad, Major Collision Investigation Unit and Counter Terrorism Command were investigating the incident.

The car was registered to a family member and police said it was not stolen.

The driver was about four cars back from traffic lights travelling west on Flinders St before he drove up on the tram tracks and accelerated into pedestrians.

"We believe he's driven down the tram tracks and he crashed into a tram stop on the other side," Patton said.

Patton said there was no ongoing threat to the public and told people to go about their business.

Victorian Premier Daniel Andrews described the incident as a "horrific act, an evil act, an act of cowardice perpetrated against innocent bystanders".

Andrews lauded the efforts of an off-duty police man who detained the driver and emergency services including police who arrived within "15 seconds" and paramedics who were there within minutes. 

"He [the off-duty officer] deserves special praise for the way in which he instinctively came to the rescue of others avoiding so much further carnage," Andrews said. 

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A witness heard screams and thumps as people were hit.

Andrews also commended the bystanders who "came to the aid of people who they had never met before".

Seven people are in the Royal Melbourne Hospital, with two of them in a critical condition. Nine people were taken to The Alfred hospital, two are in a critical condition and another is in St Vincent's Hospital. Injured along with the 4-year-old boy were; five men aged 24, 40, 43, 45 and 83 and six women, two aged 25, then four aged 30, 35, 47 and 58.

'PEOPLE ARE FLYING EVERYWHERE'

Sue from Walker's Doughnuts on Elizabeth Street told radio station 3AW that she heard screams before she saw "people flying everywhere" during the car ramming.

"We could hear this noise, as we looked left, we saw this white car, it just mowed everybody down," she said.
 
"People are flying everywhere. We heard thump, thump. People are running everywhere."

A young mother who was the scene with her young daughters told radio station 3AW they fled as the car ploughed into pedestrians.

"I didn't want the kids to see anything," she said. "We just ran.

"I wanted to get the girls out of there so we ran into the closest building. 

Chris Gath said he was standing at the 7-Eleven on the corner of Flinders and Elizabeth streets with a coffee in hand when he heard screaming.

"I heard it first and then I turned around and saw lots of bodies on the floor. 

"I saw a car ploughing into many people and bodies flying everywhere."

Gath said he saw between 60 to 100 people crossing the intersection when a car travelling what seemed like 70kmh headed for the crowd. 

He marshalled a group of people including women with prams away from the intersection to safety.

"I was a bit worried about myself so I got lots of people to run with me, and got families out of the way.

"I didn't know what was coming or how organised it was called whether it was a bomb ... so I just freaked and ran."

"[The car] ran into the tram stop"

Rohit Kaul, 45, was on the phone to his wife Avi and crossing the intersection at Elizabeth Street when he was mowed down by the car.

Kaul heard the loud noises down the line before her husband's phone cut out and she unsuccessfully tried calling him several times.

He sustained leg injuries and was helped by several pedestrians who had been walking in front of him and managed to return his wife's call.

He has been transferred to The Alfred hospital.

- The Age, Stuff