Officers were called to a factory in Second Avenue, Sunshine after nearby residents reported hearing a disturbance about 4.20am Sunday (AEST).
Police arrived and discovered a 30-year-old man armed with a firearm had fired shots into the disused factory's walls.
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Local police, a critical incident response team, the special operations group and dog squad teams were called to secure the area.
While the air wing monitored the situation, a police negotiator was on scene to speak with the man.
Firefighters were called after the man lit a fire within the grounds, but were not needed after the flames burned out.
A peaceful resolution was achieved about 7am after the man was arrested by police while attempting to flee.
It's believed he lived in the disused factory.
He is being interviewed by police.
