Witnesses described “people flying everywhere” as a white car was driven at crowds outside Flinders Street station in Melbourne just after 4.30pm (5.30am GMT).
Officers said several people are in a critical condition, adding it was “early days” in the investigation and the motivation was unknown.
Commander Russell Barrett said: “Police arrived at the scene within minutes and arrested two men. At this stage we have 14 people injured and several are critical. At this stage we believe it is a deliberate act, however we do not know the motivation and it is still the early stages of the investigation.
“Police and emergency service will remain on scene for the foreseeable future. The crime scene will be in place for a considerable amount of the time.”
Images from the scene showed a number of people receiving medical attention, while a white Suzuki SUV appeared to have crashed to a stop.
A woman called Sue told 3AW radio: “As it (the car) approached this intersection... it just mowed everybody down, people were flying everywhere.”
Social media images appeared to show a young man in jeans and a T-shirt being arrested by three police officers on the steps of the station, although it was unclear if he had been in the car.
Sky News said the driver of the SUV was of Middle Eastern appearance and that he was wrestled to the ground and handcuffed following the crash.
Lachlan Read told the Herald Sun the whole incident lasted about 15 seconds.
“It was bang, bang, bang. It was just one after the other.
“The last bang the car stopped,” the 20-year-old said. “There were bodies on the ground and people running up to them - it was mayhem.
“It is definitely something you don’t expect to see on Flinders Street.”
It was the first week of school summer holidays in Victoria, and the area was busy with Christmas shoppers.
Elton Hindoli, who works at an off licence by the scene of the incident in Elizabeth St, told the Herald Sun that a man who was pulled from the car appeared to be unconscious.
“A girl came into the shop and she was very upset,” he said.
“She said a guy in a big car had hit about six people.
“It wasn’t clear if the driver was hitting them on purpose or not.
“He hit the people then crashed into the tram area in the middle of the road.”
A man who was working in a nearby shop and was at the scene before emergency services arrived told the Australian Associated Press: “There was no screaming, just people lying there.”