Police in Melbourne have shot dead a "known terror suspect" who stabbed two officers, a day after the Islamic State group called for Muslims to indiscriminately kill Australians, officials said Wednesday.

The 18-year-old, whose passport was cancelled a week ago on security grounds, was killed on Tuesday evening, having arrived at a police station on the outskirts of Melbourne to attend a "routine" interview.

Named by media as Abdul Numan Haider, he was met by two members of the Joint Counter Terrorism Team and greeted them with a handshake before pulling out a knife and attacking both men, with one stabbed in the head, neck and stomach.

One officer fired a single shot that killed him, police said, adding that the teenager was carrying two knives.

"I can advise that the person in question was a known terror suspect who was a person of interest to law enforcement and intelligence agencies," Justice Minister Michael Keenan said on Wednesday, adding that the attack was unprovoked.

Both police officers were in a stable condition after undergoing surgery.

The attack came after IS militants released a statement Monday urging the indiscriminate killing of citizens of countries taking part in the US-led coalition against the group, which has seized swathes of Iraq and Syria and declared an Islamic "caliphate".

Australia was singled out, along with the United States, Canada and France.

"Obviously, this indicates that there are people in our community who are capable of very extreme acts," Prime Minister Tony Abbott said in a statement.

"It also indicates that the police will be constantly vigilant to protect us against people who would do us harm."

Canberra this month raised its terror threat level and last week carried out large-scale raids in Sydney and Brisbane to disrupt an alleged plot by IS supporters to abduct and behead a member of the public.

The government believes up to 60 Australians are fighting alongside IS jihadists, while 20 have returned home and at least another 100 are actively working to support the movement at home.

- Tensions with Muslim community -

Victoria state police chief Ken Lay said the teenager "had one thing on his mind, and that was to do the most amount of harm to these two people as he could".

"We were aware of this young man and had been for number of months. The fact that the joint counter-terrorism task force was doing work around him indicates our level of concern," he added.

Haider was being investigated after allegedly unfurling an Islamic State flag in a local shopping centre recently and posting inflammatory remarks on social media.

"It was a range of factors that escalated our interest in this gentleman over the recent days," said Australian Federal Police chief Andrew Colvin.

But he said it was too early to confirm or deny whether the man had made threats against Prime Minister Tony Abbott, as reported.

The Australian Broadcasting Corporation said Haider's family was from Afghanistan and he had links with Islamic group Al-Furqan in southeast Melbourne, which was targeted in terrorism raids by police in 2012.

The rise of IS and moves by Australia to tighten counter-terrorism laws have raised tensions in the Muslim community, with leaders on Wednesday detailing a backlash, including several mosques being threatened or pelted with eggs.

In one incident a pig's head impaled on a cross was left outside a mosque, while threatening messages had been spray-painted on cars, they said.

Australia has deployed 600 troops to the United Arab Emirates to join the international coalition gearing up for a campaign to eradicate the jihadists. It has also sent eight RAAF F/A18 combat aircraft.

So far Australia has only been involved in dropping humanitarian and military aid to Iraqis under siege and has repeatedly ruled out intervention on the ground.