A 21-year-old British backpacker has died after allegedly being stabbed by a French national yelling "Allahu akbar" at a north Queensland hostel.

Multiple law enforcement agencies are investigating if the fatal stabbing of the young woman was terror-related.

The 29-year-old French national - who had been in the country since March - was heard to yell "Allahu akbar" before fatally attacking the woman and critically injuring a 30-year-old British male backpacker.

Queensland Police Service Deputy Commissioner Steve Gollschewski said he yelled it again when police arrested him at the Shelley's Backpackers hostel in Home Hill, south of Townsville, where the attack occurred about 11.15pm on Tuesday.


The 21-year-old woman died at the scene, while the man was rushed to Townsville Hospital, where he continues to fight for his life.

A man in his 40s also suffered non life-threatening injuries.

A dog was also stabbed to death.

Mr Gollschewski said the French man remained in police custody but was yet to be charged.

The alleged knifeman has been treated in Townsville Hospital for cuts to his arm.

He remains there under police guard but is yet to be interviewed by detectives.

Mr Gollschewski moved to reassure the community he appeared to be acting alone.

"The investigation is still in its early stages, however, initial inquiries indicate that comments which may be construed as of an extremist nature were made by the alleged offender," he said.

A young British backpacker has been fatally stabbed at a hostel near Townsville. Photo / AAP
A young British backpacker has been fatally stabbed at a hostel near Townsville. Photo / AAP

"It is alleged the suspect used the phrase, 'Allahu akbar' during the attack and when arrested by police.

"While this information will be factored in we are not ruling out any motivations at this stage, whether they be political or criminal."

Mr Gollschewski said mental health would also be examined as a possible factor in the crime.

Townsville police Superintendent Ray Rohweder said a fight erupted between the trio in front of 30 onlookers at Shelley's Backpackers before the man and woman were stabbed.

Paramedics were called but were unable to save the young woman, who was pronounced dead at the scene.

The stabbing occurred at Shelley's Backpackers in Home Hill. Photo / News Corp Australia
The stabbing occurred at Shelley's Backpackers in Home Hill. Photo / News Corp Australia

Supt Rohweder said the British consulate had been notified and was in the process of breaking the news to the next-of-kin of both the young woman and man.

He said it was not yet clear what sparked the fatal fight.

"We're still trying to piece together what has happened, as you can imagine there were a lot of people present at the time, there are in excess of 30 witnesses, but as we understand it the French gentleman has attacked both the two British nationals," he said.

"We're still trying to establish motive, it's not until we speak to all witnesses we will be in a position to know more."

Home Hill is a small town in the centre of a fruit and vegetable growing region south of Townsville, where many young backpackers stay for extended periods to undertake seasonal picking work.

Supt Rohweder said it was believed the trio were all known to each other and had been staying at the backpackers hostel while working locally.

He described the scene that met officers who arrived as a confronting one.

"I can tell you the scene that confronted police was terrible, both officers in my book acted tremendously (and) ensured the safety of others," he said.

Supt Rohweder said police had seized a knife believed to be used in the fatal attack at the scene and did not suspect anyone else of being involved in the young woman's death.