Addressing the media, Superintendent David Clayton said that the man who attacked the people was shot in the chest and he is now critically injured.
Video posted on Twitter and broadcast on television showed the man swinging a knife at two police officers, while his utility truck burned in the background.
Chief Commissioner Graham Ashton says the Somalian-born Khalif, also known as Hassan Shire, was the brother of a man arrested by police late past year in relation to committing acts in preparation for a terrorist attack. However, the police has clearly refuted any links of terrorism with the incident.
Footage from the scene shows a man earlier swinging a knife at two uniformed officers near a burning auto before he was shot.
The area has been cordoned off and people have been asked to avoid the area.
Victoria's ambulance service said that three injured people were being treated at the scene.
"Australians will never be intimidated by these appalling attacks".
He lunged at them with a knife when they got out of the vehicle.
Clayton said there is no known link to terrorism, but stressed the investigation is still in its early stages.
The attack during the afternoon rush hour brought central Melbourne to a standstill.
Police said they were "not looking for anyone further at this early stage".
He was shot by police and died shortly after arriving at hospital under police guard. One of his victims also died in the hospital.
The officers were seen trying for at least a minute to detain the man peaceably as his attacks on them continued, before one officer shot him in the chest.
Victoria Police are urging any witnesses to the incident to attend Melbourne West Police station to give a statement, or alternatively upload any images or videos from the incident to the Victoria Police facebook page.
Two members of the public came to the aid of police, one using a shopping trolley and another using a chair to try and stop the attacker.
Victoris Premier Daniel Andrews described Friday's attack as "evil" but said the city would not be bowed.
"Because he was on his stomach, they turned him over to see if he's all right, he was still alive", the witness, Markel Villasin, told Australian Associated Press.
James Gargasoulas is accused of deliberately driving his vehicle into pedestrians on Bourke Street, hitting 33 people.