Multiple people were hurt in a rush hour stabbing incident in Melbourne's central business district, police said on Friday, after they apprehended a suspect near a burning vehicle.

Victoria Police said officers "initially responded to a report of a car on fire" in the city center at around 420 pm local time, as people began to leave work for the weekend.

"A man was arrested at the scene and has been taken to hospital under police guard in a critical condition."

Local media showed video footage of a large man in a dark tunic slashing and stabbing wildly at two police officers as the vehicle burned, before being shot with a weapon.

Paramedics said they assessed three people at the scene, one with a neck injury: "They are in a suspected critical condition".

"A second person has been taken to hospital with a head injury. Condition not yet known. A third person has also been taken to hospital."

Police warned people to avoid the area, but said they "are not looking for anyone further at this early stage".

"The exact circumstances are yet to be determined at this stage. The area has been cordoned off," police said.