Much of the centre of Melbourne is in lockdown as police search for the gunman who fled on foot east of the city after the shooting.
Eyewitnesses saw the man drag a woman out of a cab on the corner of Flinders Lane and William Stree in the city just after 8am.
Two bystanders apparently came to help the woman, only for the aggressor to pull a handgun and shoot all three.
A police spokesman said a male had died in the shooting and a man and a woman had been taken to hospital.
Ambulance officers have placed a sheet over a body at the scene of the shooting, near the corner of Flinders Lane and William Street.
Cherie Harding, a worker in the Rialto building opposite the shooting scene, said several of her colleagues heard up to four shots.
Ms Harding said she saw ambulances at the scene and stretchers being used to transport patients.
“There are a few people here who heard them (gunshots),” she said.
Police said they were now searching for the gunman in Melbourne's city district.
Ambulance spokesman James Howe earlier told of paramedics trying to resuscitate a critically injured victim at the scene.
He believed the gunshot wounds were in the victims' upper bodies.
Melbourne's city centre was in shutdown as police searched the area for the gunman, with offices sealed off and people kept away from nearby workplaces.
Witness Carly, who is in the Rialto building on Collins Street, said people in her building had been told not to move.
“We've just been told that none of our people who are waiting downstairs to come upstairs can come up,” Carly told 3AW.
“They've blocked off all the access to the floors in our building because they're still looking for the shooter.
“We're not allowed to go anywhere and no-one is allowed to come up into the building.”
Carly said she had heard six or seven shots about 8.15am, coming from the corner of Flinders Lane and William Street.
Police Inspector Glenn Weir asked people in the area not to panic.
“There is an extensive search underway to try and find the offender at the moment,” Insp Weir said.
“There are numerous police attending to the search within the vicinity of the incident and there is a large cordon and containment operation underway as we speak.
“We are just asking the public not to panic and assist police if requested and if you have no business being in the vicinity of Flinders Lane and William Street please keep out of the area.”
The gunman is described as wearing black jeans and a denim jacket, with short light brown hair.
Inspector Weir said it appeared the gunman knew the victims.
“There is no suggestion this is a random act - it appears there was a relation with the gunman and the victims, so we are asking people not to panic,” he told ABC radio.
Malcolm Bates, a witness, said before the shooting broke out the gunman grabbed a woman by the neck as she sat in a taxi, and tried to get into the vehicle.
“The lady got away and he turned and shot three people basically point blank,” Mr Bates said. “I was right across the road.”
He told ABC radio the gunman then ran down Flinders Lane toward the city centre.
He said the whole scenario took no longer than “the wink of an eye”.
Police wearing bullet-proof vests were scouring the area, and police helicopters hovered overhead.
Insp Weir said the last confirmed sighting of the gunman was east of the shooting scene, on Flinders Lane.
The Victoria Police homicide squad this morning took over the investigation as the police Special Operations Group joined the search for the gunman.
Police have blocked off a number of city streets until further notice and have also begun evacuating some buildings.
Police said a handgun had been found a short time ago at a Melbourne city construction site near where the three people were shot.
The gun was found at the construction site on the corner of Flinders and Queens streets they said, but had yet to confirm if it was the one used in the shooting spree.
- with wires
Police in Melbourne, Australia are on the hunt for a gunman who killed a man and injured two others in the city's central business district this morning. 

Officials warned all office workers to remain indoors, and train services to Flinders Street Station were temporarily on hold, as investigations were carried out on the intersection of Flinders Lane and William Street.

Malcom Bates, who witnessed the shootings at around 8:15 a.m., said the gunman grabbed a woman from inside a taxi. "The lady got away and he turned and shot three people basically point blank," Mr Bates said. "I was right across the road". He said that the incident took no longer than the "wink of an eye".

Paramedics struggled to revive the one victim for almost an hour before declaring him dead at the scene. The two injured people have been taken to the Royal Melbourne Hospital in a critical condition.

Police believe the incident began at the Bar Code 24-hour bar in King Street, when a woman attempted to get into a taxi. She was apparently grabbed by the hair by the gunman who then shot her and two men who attempted to come to her aid.

Police have identified the gunman as Christopher Wayne Hudson, aged 29. They believe him to be a member of the Hells Angels bikie gang. Police have described Hudson as about 180 cm tall, with short brown hair and wearing a dark tracksuit top and dark denim jeans.

A building worker on a construction site on the corner of Queen and Flinders Streets has reportedly discovered a handgun. It is understood the gunman may have thrown the weapon into the site as he fled the scene.