Unconfirmed reports say shots were fired during the incident in Melbourne, which happened at 1:30PM local time (2:30AM GMT).
Photos show terrifying scenes in the city’s CBD as emergency services gather near the incident on Bourke street – a busty shopping street.
Melbourne's Royal Children’s Hospital confirmed they are treating four children in connection with the incident.
The terrifying incident occurred in Melbourne's CBD
Footage posted on Twitter show officers dragging a man out of a battered maroon car.
And witnesses posted video footage of the car appearing to drive erratically in circles in the middle of a busy street.
Police reportedly arrested the driver of the vehicle.
A spokesman said the incident was related to an earlier stabbing in the Windsor area of the city but ruled out terrorism.
He added: "Avoid the city tonight."
— bwadamson (@BWAdamson) 20 January 2017
He was going like a bat out of hell
Witness Kylie Clark
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Victoria police took to twitter to request that people stay away from the area.
They said: "Police are aware that a number of people have been injured in the CBD (central business district).
"The exact circumstances of the events are still being determined.
"Pedestrian access has been closed along Bourke Street between Williams and Swanston.
"Police are asking for the public to avoid the area."
Mother Kylie Clark and her 10-year-old daughter Ingrid saw the horrific incident unfold.
Ingrid told the Age newspaper: ”Bodies were flying across the windscreen, and over the back, others were under the car.”
Ms Clark said: ”He was going like a bat out of hell. Didn't care who he collected. Straight up the footpath.
"People were screaming. It was chaotic."
Victoria police reportedly arrested one person following the incident
Almost immediately after the horrific incident, Australian Liberal Democrats Senator David Leyonhjelm sparked fury by tweeting: “Probably one of those semi-automatic assault cars.”
Twitter users reacted with outrage.
Shane Bazzi replied: “Delete your account, scumbag.”
And television presenter Tom Steinfort wrote: “You really are a pathetic grub.”
More to follow…