Victoria Police says the operation is ongoing, however police do not anticipate further arrests.
Furthermore, the arrest is not linked to any previous operational activity.
"Victoria Police and the Australian Federal Police would like to reassure the community that the threat has been contained and there is no ongoing risk posed by this individual," a spokesman for the force added.
"Victoria has well tested, co-operative, counter terrorism and emergency management plans in place and constantly monitor and assess our preparedness to respond to a range of emergencies."
Victoria Police, the Australian Federal Police and the Australian Security Intelligence Organisation (ASIO), which form the Joint Counter Terrorism Team, conducted the investigation into the alleged terror suspect.
- additional reporting AAP