Victoria Police, the Australian Federal Police, the Australian Security Intelligence Organisation (ASIO), and other agencies which form part of the Joint Counter Terrorism Team have conducted an operation in Melbourne to catch the three people.

"Operation Donabate resulted in the arrest of three men and the execution of four warrants in the North West Metro Region this morning," reported Victoria Police.

The arrested men are aged 21, 26 and 30.

The police further said in the statement: "It will be alleged the three men arrested were involved in undertaking preparations for planning a terrorist act in Melbourne."

"Victoria Police would like to reassure the community that the threat has been contained and there is no on-going threat," it further said.

The police said the attackers were 'inspired by ISIS'.

Speaking on the issue, Victoria Police Chief Commissioner Graham Ashton was quoted as saying by CNN: "Certainly, inspired by ISIS, we know that and recently over about the last week we've become a lot more energized."