Melbourne Gunman kills 'good samaritan', two hurt

A man shot dead by a gunman at a busy Melbourne city intersection may have been just a good samaritan helping a woman involved in a domestic dispute, police and witnesses say.

The gunman is on the run after shooting three people on the corner of Flinders Lane and William Street, killing the man and wounding a woman and a man.

The gunman fled on foot after the 8.15am (AEST) shooting and police later found a handgun at a nearby construction site, which was believed to be that used in the incident.

As heavily-armed police searched for the shooter, aged in his late 20s or early 30s, office workers were told to stay put and not panic.

Witnesses and police said the gunman appeared to be involved in a violent domestic dispute with a woman in a taxi and when two men intervened, he shot all three down.

Police appealed for the taxi driver to come forward.

Police said the shooting followed an earlier incident outside a King Street nightclub.

Bystander Ross Murchie said he saw the gunman grabbing a woman by the neck and hair.

"She was screaming and a guy had her by the hair," Mr Murchie told ABC radio.

"She tried to grab hold of a taxi that was going by and the couple of bystanders went over to ask what was happening.

"He let go of her hair, pulled out a gun and shot them all."

One man died at the scene despite paramedics attempting to resuscitate him, while a man in his 30s and a 24-year-old woman were in a serious condition, undergoing surgery at Royal Melbourne Hospital.

Inspector Glenn Weir said it appeared the shooting was a domestic incident between the shooter and the female taxi passenger and not a gang-related or random act.

"It does appear that there was a relationship between the female and the male suspect and certainly we're not looking that it's a random act, certainly not gang-related, it appears as though it's a domestic-related incident," Insp Weir said.

He said the two male victims appeared to be good samaritans who had stopped to come to the woman's aid as she struggled with the shooter in the street.

"That's certainly one of the avenues of inquiry that we're undertaking and that looks more likely as time goes on," Insp Weir said.

Detective Inspector Stephen Clark, from the homicide squad, said witnesses told police there was an altercation in the King Street nightclub area 10 minutes before two men and a woman were shot.

"It appears there has been an initial assault that has taken place in King Street in the nightclub area," Det Insp Clark said.

Eyewitness Zali said the gunman was "as cool as a cucumber" as he cold-bloodedly blasted his victims.

"He just went bang, bang, bang, there was no mucking around," she told ABC radio.

"There were five shots fired and the people went straight down to the ground. There wasn't even a scream, just a whimper."

Eyewitness Malcolm Bates said the gunman attempted to climb into the cab before the shootings began.

"The lady got away and he turned and shot three people basically point blank," Mr Bates said. "I was right across the road."

The gunman was last seen heading east, and soon after police locked down the area, sealing off offices and evacuating some buildings.

Police began escorting workers back into nearby buildings shortly before 10am (AEST).

The Homicide Squad took over the investigation and the police Special Operations Group joined the search for the shooter.

Police later found a handgun and a dark jacket at a construction site on the corner of Flinders and Queen streets, and were confident they belonged to the gunman.

"It was found by a witness and communicated to the police," Insp Weir told Southern Cross Broadcasting.

"(It was) a handgun I can confirm and there are reports that it's a semi-automatic handgun but I can't confirm that."

Insp Weir said police were speaking with a large number of witnesses at the shooting scene.

Witness Zali said she had heard what sounded like a cap gun.

"I turned my head over to look to the right of me and saw the gentleman shoot the three people and them go down.

"I quickly pulled over to the side of the road and ran across the road and he'd taken off up the road (and) ran up towards Flinders Street station.

"It's amazing what happens in a time of crisis because the people that flocked around to help those that had been hurt were just excellent, in the sense of as much as there were some screams of hysteria, the sense of protectiveness and getting help and the number of people (calling for help) on the phone was just outstanding."

Meanwhile, hundreds of Telstra workers in Melbourne's city Rialto building have been offered counselling after the shooting, which happened one block from the hotel and office complex.

The Rialto, backs onto Flinders Lane and was shutdown in the aftermath of the shooting, with no-one allowed to enter or leave the building.

Telstra spokesman Peter Taylor said some Telstra workers saw the attack.

"We understand five Telstra people witnessed the shooting," Mr Taylor said.

"The counselling service is part of Telstra's long-running, independent counselling service for staff in difficult situations."