The incident occurred in the centre of city, when a car driver crashed into the crowd of pedestrians at around 2 PM local time, local media reported.
"A male deliberately drove into pedestrians in the Bourke Street mall," Acting Commander Stuart Bateson said as quoted by The Guardian on Friday.
Three people were killed and 20 others wounded, including a toddler, according to local police.
The perpetrator has been detained, police reported. It's also been said that the incident is not related to terrorism.
"We believe it is connected to an earlier stabbing in the southern metro region," Bateson said.
Initially local police reported about one killed in the incident.