Three men arrested on suspicion of plotting a terror attack in Melbourne had tried to source a semi-automatic rifle to kill as many people as possible in a crowded space, police have alleged.
The men, who are aged between 21 and 30, had been under surveillance since March, police said.
They said the men - two of whom are brothers - were inspired by the Islamic State terror group.
They were arrested in counterterrorism raids this morning after their intentions of carrying out a mass killing "escalated" this week, Victoria Police Chief Commissioner Graham Ashton said.
Mr Ashton said the men had not decided on a specific location for the attack.
"There was a view towards a crowded place where maximum people would be attending to be able to kill, we allege, a maximum amount of people as possible," he said.
"[They were] certainly inspired by ISIS, we know that."
The raids involved more than 200 officers from Victoria Police, the Australian Federal Police (AFP) and ASIO.
Mr Ashton declined to name the men, but said all three were Australian nationals whose passports were cancelled this year.
One of the men's passports was cancelled in January, another in March and the third last month, he said.
"All three people are Australian nationals of Turkish background," Mr Ashton said.
The suspects - a 30-year-old man from Dallas, a 26-year-old man from Campbellfield and a 21-year-old man from Greenvale - are being interviewed by police, who expect to lay charges today, Mr Ashton said.
Trio 'energised' in past week
Mr Ashton said the men had made attempts in the past few days to obtain a 0.22 semi-automatic rifle to carry out the attack, but would not confirm if attempts were made to obtain more than one rifle.
"Recently, over about the last week, they've become more energised so there's certainly been a lot of publicity and talk about terrorism and certainly public place activity," Mr Ashton said.
"We had the Bourke Street [car attack] trial on as well so there was certainly a lot of public awareness around mass casualties and terrorism over recent times.
"I don't know whether that's played a role or not. But certainly over the last week they've become energised about doing something more quickly."
He said two of the men had no criminal history, while one had a minor record for failing to display L plates in 2007.
"Other than that there's no criminal history or background, certainly no bail or anything like that applying in this case," he said.
Mr Ashton said the trio's use of encrypted communications made it difficult for police and intelligence agencies to discern their plans.
Home Affairs Minister Peter Dutton has been pushing for new laws to make it easier for authorities to access messages sent through encrypted messaging apps.
Consequences 'would have been chilling'
AFP Assistant Commissioner Ian McCartney said if police and intelligence agencies had not acted decisively, many people might have been killed.
"We'll allege the consequences would have been chilling, with … a potential significant loss of human life," he said.
He said the charges the men would face carried a penalty of life in prison.
Mr McCartney said 90 people had been charged in relation to 40 counterterrorism investigations across Australia since September 2014, when the national threat level was raised.
He said the men's passports were cancelled because of concerns they intended to travel to a "conflict zone".
"At the time the decision was made, the concern was that they would travel offshore and may be involved in terrorist activity offshore," Mr McCartney said.
He said it was important to note that authorities did not believe the attack was directed by ISIS.
"It's an attack that's been inspired by ISIS, driven by the propaganda machine, and unfortunately people are still listening to that propaganda machine."
Officers executed four warrants during the raids, which involved the search of a fourth property at Coolaroo, the statement said.
Premier Daniel Andrews said the arrests confirmed Victorians were well served by police and intelligence agencies who had "put themselves in harm's way to keep all of us safe".
An earlier statement released by Victoria Police said there was no "ongoing threat" to the public linked to today's arrests.
Police are urging the public to go about their normal business and report any suspicious activity to triple zero, or the National Security Hotline on 1800 123 400.
The raids come as thousands of people are expected to attend a state funeral for restaurateur Sisto Malaspina, who was stabbed by an Islamic State-inspired attacker in Melbourne's Bourke Street on 9 November.
Earlier this month, three men were found guilty of plotting to carry out a terror attack in Melbourne's CBD during the 2016 Christmas period.