An Islamic State-inspired Christmas Day terror plot targeting central Melbourne with explosives has been foiled after raids across the city resulted in seven arrests, police said today.
Victoria Police chief commissioner Graham Ashton alleged those detained planned to attack high-profile locations including Melbourne's iconic train station, Federation Square and St Paul's Cathedral.
"Over the last fortnight... We have had to conduct a criminal investigation relating to the formation of what we believe was a terrorist plot," he told a press conference .
"We believe that there was an intention to conduct what we call a multi-mode attack, possibly on Christmas Day.
"The attack that we will allege was being planned, we believe was going to involve an explosive event, the use of explosives, and we gathered evidence to support that."
Of the seven arrested today morning, five remain in custody.
Ashton said four of them were Australian-born, of Lebanese background, with the fifth an Egyptian-born Australian citizen, all in their 20s.
"Certainly these are self-radicalised, we believe, but inspired by ISIS and ISIS propaganda," he added.