A police officer has shot dead a woman after she drove an SUV into him, pinning him against a wall in a “terrifying” incident.

The officer had been making an arrest following reports of a man with a machete in South Melbourne at about 5pm on Saturday when events unfolded.

Two officers found the man and were arresting him in Cecil Street when a white SUV drove at them, police said.

The car, reportedly a stolen Ford Territory, hit the male senior constable, who fired four shots at the vehicle.

The bullets killed a 34-year-old female in the driver’s seat and injured a 26-year-old male passenger.

The woman died at the scene and the passenger was taken to hospital with non-life threatening injuries.

The officer was taken to hospital with serious but non-life-threatening injuries to his legs.

The other police officer was unharmed, and the man with the machete was taken to hospital for observation.

Acting Assistant Commissioner Therese Fitzgerald said police were trained to respond to such incidents, adding the officer was “extremely lucky” not to suffer worse injuries.

“This is the kind of incident that all of or members are at risk of at any time,” she told reporters.

“This is not a great day for you at work when this occurs, so yes, it is terrifying.

“The police members are trained to respond in a certain way and that’s what’s taken place.”

Police had been responding to reports of a man with a machete. Photo: 9NEWS

Fitzgerald said it appeared the officer’s actions were “in line with his training”.

“Every day our police members get in the divisional van and respond to incidents… that’s the nature of the job.

“We are really grateful that his injuries are not more serious, it could have been far worse.”

Police Association of Victoria secretary Wayne Gatt said the officer’s training “may have saved his life”.

“TPAV have despatched a team to provide professional and personal support to both officers involved and their colleagues.

“They will have all the support and assistance they require as they deal with the events this evening.”

-with AAP