The driver, named as Saeed Noori, is accused of ploughing a car into pedestrians on Flinders Street - nineteen people were injured in the incident on Thursday - the area was crowded with Christmas shoppers.
Nine of the victims were foreign nationals.
The 32-year-old is an Australian citizen of Afghan descent with a history of mental illness.
It's believed Mr Noori was living in West Heidelberg.
On Friday afternoon 7 News released images of Mr Noori in police custody.
He is expected to be interviewed by police later today.
A man is held by police after the Flinders Street pedestrian incident. Source: Lachlan V
Prime Minister Malcolm Turnbull has said there was no proof the accused was a politically motivated terrorist.
He said while police claim he was partly motivated by the "mistreatment of Muslims" police were not describing the attack as terrorism.
He said it was not his job to "jump to conclusions" and said labelling the attack as terrorism was a job for the police.
On Thursday police alleged the act was "deliberate" but did not speak of a motive.
Melbourne began returning to normal on Friday, with roads reopened.
But there was a boosted armed police presence, with a major carols by candlelight event scheduled for Christmas Eve and the Boxing Day cricket Test between Australia and England taking place nearby.
The off-duty police officer was singled out for praise following his response to the Melbourne pedestrian incident. Source: AAP
