Video shot from the scene showed the frenzied attack that carried on for more than a minute, beginning with Ali charging at two police officers, punching one through a vehicle window and lunging at them with a knife.
One man, a 74-year-old restaurant worker in Melbourne's CBD who police have not yet named, died at the scene after being stabbed.
A courageous bystander dubbed "Trolley Man" has been praised for his selfless actions in his attempt to halt the knife-wielding man who stabbed three people in Melbourne.
He since died in hospital and was known to police.
"This is an evil and terrifying thing that has happened", Victoria State Premier Daniel Andrews said.
The man has been arrested and is under police guard in hospital. "He was radicalised", Australian Federal Police Acting Deputy Commissioner Ian McCartney told reporters in Melbourne.
"The assessment was that person was not a threat at that time", Deputy Commissioner McCartney said.
Ashton said a four-wheel drive Ute drove into Bourke street between Russell and Swanston Street and parked there.
More than 100 police swarmed on the area.
"For operational matters we now have the counter-terrorism command and the homicide squad dealing with this matter, and there are ongoing investigations being conducted by the counter-terrorism command", he continued.
It was also noted police are unable to get in touch with the Khalif's wife, and believe she is both missing and radicalized.
Melbourne's Lord Mayor Sally Capp sought to reassure the public and praised the police for their swift response.
He did say though it looked like there had been some attempt to light a fire as the canisters had been "turned to open".
He tried to attack the officers and was shot at close range.
"You're trained to shoot to kill, not to shoot to wound".
In 2017, another deadly incident occured on the same street after James Gargasoulas drove his auto into pedestrians, killing six.
It comes as Prime Minister Scott Morrison called out the "great threat" of extremist Islam. It's believed the raids are linked to yesterday's terror attack.
"I need to call it out".
"But here in Australia, we would be kidding ourselves if we did not call out the fact that the greatest threat of religious extremism in this country is the radical and risky ideology of extremist Islam", he said.
"Nearly within a minute, Victorian Police officers were in attendance in an unmarked vehicle", Ashton said.
A third person has also been taken to hospital, although the nature of their injuries is not yet known. I thought it was a vehicle backfiring but there was flames coming out of the auto.
Ms Aly said they should not "single out religions, single out communities. causing divisions where we don't need divisions to be caused". The attack horrified hundreds of onlookers during the afternoon rush hour in Australia's second-biggest city.
"Keep being yourselves, keep being Australians", he said.
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There had been calls for the match to be cancelled after the murder of Saudi journalist Jamal Khashoggi in Istanbul. I've been always trying to be very professional and respectful towards people that I have commitments with.
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