Man shot dead by Melbourne police

A man has been shot dead by two police officers on a busy Melbourne street after he lunged at them with a knife.

And a New Zealander was among the eyewitnesses to the shooting.

Police believe the 30-year-old man from Geelong was involved in a stabbing at a nearby hotel earlier on Sunday evening.

The officers had been called to the Gatwick Hotel in St Kilda about 7.30pm after a woman had been stabbed in the back, allegedly by two men.

Assistant Commissioner Luke Cornelius said the constables spotted two men matching the description of the attackers as they drove from the hotel about 10pm.

He said the police officers got out of their car and told the men to stop but one of the men advanced towards them with a knife.

The officers said the man ignored repeated calls to drop the knife and was shot when he lunged at them.

The man was shot on Grey Street, just one hundred metres from a busy strip of restaurants and pubs on Fitzroy Street in St Kilda.

Paramedics said the man was already dead by the time they arrived at the scene.

Witnesses at a backpackers hostel just 20 metres from the shooting reported yelling before three shots were fired.

Mr Cornelius said initial evidence supported the decision of the two uniform members from the local station to fire on the man.

"It's pretty clear my officers found themselves in a position where they had no choice but to discharge their firearms in order to prevent themselves from either being seriously injured or killed."

"No police officer wants to go to work and kill someone.

"I've spoken to the members they are very upset and very concerned."

When asked if the officers were carrying Tazers, Mr Cornelius said only that: "They had the full range of operational safety equipment available to them."

He would not reveal details of whether capsicum spray had been used or how many shots were fired, but said several officers were at the scene at the time of the shooting.

Police also arrested one man and two women in connection with the earlier stabbing, but released no further details surrounding the initial assault.

A New Zealand tourist, Paul, was in the foyer of Coffee Palace Backpackers when he heard the shots fired.

"There were three gunshots, then the body was in the middle of the road, and then everyone else was on the floor and the cops had their guns out making sure no one was moving," he said.

"He was still moving... there were a lot of cops.

"I heard someone screaming ... then they (police) were telling everyone else to get on the ground."

It is the first fatal police shooting since the death of teenager Tyler Cassidy in 2008.

The Homicide Squad and the Police Ethical Standards Department are investigating the shooting.

"The Homicide Squad will prepare a brief of evidence oversighted by the Ethical Standards Department and the coroner will determine whether a coronial inquest should be conducted," Assistant Commissioner Cornelius said.

- AAP