Officers were called to Cecil Street in South Melbourne at about 5pm after reports of a man with a machete.

They were in the process of arresting a man when a car drove towards them, striking a police officer.

Police shot at the car, striking the woman driving it, and her male passenger.

The 34-year-old woman, of no fixed address, died at the scene.

A 26-year-old St Kilda man was taken to hospital, where he remains with non-life-threatening injuries.

A male senior constable was taken to hospital and released after receiving treatment for leg injuries.

A 39-year-old South Melbourne man has now been charged with weapon possession and stealing a bicycle.

He was bailed and will appear in court on August 12.

The investigation continues with oversight from Professional Standards Command, as is usual for a fatal police shooting.

Any witnesses or anybody with information is urged to contact Crime Stoppers on 1800 333 000.