A hostage siege on Melbourne’s Mornington Peninsula is over.

A man, 69, has been taken into custody over the siege and two female hostages released unharmed.

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Police were called to the bakery, near the corner of Point Nepean Road and Ozone Road in Rye, at 7.45am on Saturday after reports of an armed man inside.

Heavily armed officers cordoned off the area and began hours of negotiations with the man, who police said was known to the hostages.

Anton Vigenser, owner of a nearby cafe, told the Herald Sun the gunman might be the ex-partner of one of the hostages.

He says a man had visited the workplace on other occasions and numerous altercations had occurred in recent weeks.

“There’s been some arguments before,” Mr Vigenser told the newspaper.

“But nothing like this … it’s escalated.”