Officers arrived at the car park on the corner of Flinders Street and Hosier Lane shortly before 7.50am after reports two men had restrained a third.
Dick has been taken to hospital under police guard, while two other men also injured in the incident are helping police with their investigation.
Part of Hosier Lane and the neighbouring car park remain taped off as detectives investigate.
A red-handled, curved knife and what appears to be blood can be seen on the ground in the car park entrance.
It comes after television footage showed a man wearing a hooded jumper sitting against a wall, his face covered in blood.
Within the cordoned-off laneway a bike and helmet lay on the road alongside a bucket.
A woman who lives in an apartment above the scene says she was shocked to find police outside her door.
"I literally came out the front door and had absolutely no idea (what had happened), and saw the policewoman in our front door and was just like 'what's going on'," Alison Fairly told AAP.
"I've lived in that building for 12 years and I've never seen a police presence like that. And it's a pretty busy laneway.
"So I've seen a lot of police action but that's something else."
Source: Stephanie Corsetti / SBS News
Before his arrest, police believed Dick was hiding out - possibly in someone's home or a hostel or boarding house - and getting by on cash-in-hand construction work.
He was also wanted for questioning over a hammer assault on a man at Keilor, five months after his brother's murder.
Last year a $100,000 reward was offered for Dick's capture.