Shire Ali stabbed bystanders and attacked police while his utility truck carrying barbecue gas cylinders burned on busy Bourke Street.
Police said Shire Ali's Australian passport was cancelled in 2015 after an intelligence report he planned to travel to Syria, but an assessment was made that whilst he had radical views, he posed no threat to national security.
Chief Commissioner Graham Ashton last night confirmed Shire Ali died in hospital.
A burnt out vehicle is seen on Bourke Street in Melbourne, Friday. He then engaged with members of the public at that location, " he said.
Witnesses say they heard one bang or multiple bangs and gunshots in the area, which was subsequently put on lock down. At that time other police were starting to arrive.
The man who has been hailed as a hero for ramming the knife-wielding Bourke Street attacker with a supermarket trolley has described how he acted instinctively.
At one, a modest one-story brick house on the city's western fringe, armed officers wearing masks stood guard outside.
The set up of gas cylinders in Shire Ali's vehicle, deliberately opened to cause an explosion, was described by police as "not remotely sophisticated".
The suspect was was hospitalized in critical condition. The suspect was shot in the chest by police, Clayton said. He is said to have emigrated from Somalia to Australia in the 1990s and accumulated a record of minor infractions such as "cannabis use, theft, and driving offenses".
Ashton added that Counter Terrorism Command will investigate alongside Victoria police.
Witnesses said the man began attacking pedestrians near a pickup truck apparently belonging to the attacker which had exploded into flames.
Three person were stabbed in the Melbourne CBD this afternoon and one person is dead, along with the knifeman. A woman named Maree Patterson identified one of the injured victims as her husband Rodney in a Facebook post and said he was "doing OK given the circumstances".
Police examine a body in Bourke St.in Melbourne, Australia, on November 9, 2018.
"I've known [his father] for 30 years, he is a kind and respected man in the Somali community", one said.
People also told local media that they saw police trying to calm down the attacker.
"He was breathing and he was bleeding out".
Footage captured the shocking scenes as a auto went up in flames and police shot the knife-wielding man in the chest after he confronted officers as they arrived at the scene.
Officers were confronted near the burning auto by a man "brandishing a knife and threatening them" while passersby called out that people had been stabbed, Victoria state police Supt.
Horrified bystanders begged police to shoot him.
"Australians will never be intimidated by these appalling attacks and we will continue to go about our lives and enjoy the freedoms that the terrorists detest", he said.
Victorian Premier Daniel Andrews led the online praise of the officers and the passers-by who "came to the aid of complete strangers".