Christmas Day militant plot foiled in Australia: Police

An Islamic State group-inspired Christmas Day militant plot targeting central Melbourne with explosives has been foiled after raids across the city resulted in seven arrests, police said on Friday.

Victoria Police chief commissioner Graham Ashton alleged those detained planned to attack high-profile locations including Melbourne's iconic Flinders Street 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.

Ashton said police believe there was a plan for 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," he added.

Of the seven arrested on Friday 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, using an acronym for the Islamic State (IS) group.

Prime Minister Malcolm Turnbull said the plot was "very substantial".

"This news will be of great concern to all Australians," he said in Sydney on Friday. "We congregate in public places for Christmas, for New Year's Eve. It is a time of happiness and joy. These terrorists sought to disrupt it. They have been thwarted."

Citing the Berlin truck ramming attack that left 12 people dead in Berlin, Turnbull described militancy as "Islamist terrorism", saying that it poses a global challenge.