Counter-terrorism police say they have foiled an alleged terror plot to shoot revellers celebrating New Year's Eve at Melbourne's Federation Square.
The 20-year-old Werribee man, described by police as a "high risk" person, was arrested on Monday afternoon.
It will be alleged he was involved in undertaking preparations for planning what Victoria's police deputy commissioner Shane Patton described as a "horrendous" terror attack.
"This is a person who expressed an intention to try and kill as many people as he could through shooting them in Federation Square on New Year's Eve," Patton said on Tuesday.
The man had tried to obtain a firearm, he said.
"He becomes particularly energised when he sees other activities in the terrorist arena occurring," Patton said.
"We are still exploring how he actually came to be radicalised."
Patton said police had been monitoring the man, who worked part-time at a "computer business", since the start of the year.
The man was being interviewed in relation to the offences of "acts in preparation to commit a terrorist attack" and "collecting documents to facilitate a terrorist act", a joint statement from the Australian Security Intelligence Organisation (ASIO), federal and Victorian police issued on Tuesday morning said.
Warrants were also executed at two residential properties in Werribee and Meadow Heights, as well as a commercial property in Footscray.
Police reassured the community the threat had been "contained" and said there was "no on-going risk posed by this individual".