Police officials said they have pinpointed an Australian terrorist cell supporting and directly involved in insurgency activity in Somalia.

In pre-dawn raids, some 400 officers from the Australian Federal Police, Victoria Police and NSW Police launched a series of raids in Melbourne under operation codenamed 'Operation Neath' and arrested four persons – all Australian citizens. Some plotters were of Somali descent, others Lebanese.

Police said the arrested persons were being questioned and several others are assisting with inquiries.

The raids followed a seven-month surveillance against the plotters, who are allegedly linked to al-Shabaab, a Somali Islamic extremist group, Australian Federal Police Acting Commissioner Tony Negus told reporters.

A NSW police spokesperson said 20 officers from the Counter Terrorism and Special Tactics Command helped in the Melbourne phase of the investigation over a number of months.

"Details of the planning indicate the alleged offenders were prepared to complete a sustained attack on military personnel until they themselves were killed," a federal police spokesman said.

No raids or arrests were made in NSW, the spokesman said.

"The men were planning to carry out a suicide terrorist attack on a defence establishment within Australia involving an armed assault with automatic weapons," the official said.

The investigation revealed some of the alleged plotters had travelled to Somalia to join fighting there, he said.

The group had been "actively seeking a fatwa, or religious ruling, to justify its plan for a terrorist act in Australia," Negus said.

Victoria Police Chief Commissioner Simon Overland said search warrants issued across Melbourne and at Colac in the state's south-west may take 24 hours to complete.

Overland said police had been anxious to control the alleged threat during their investigation and the time had come to act.

"I think it's sufficient to say that we got to a point where we were satisfied it was appropriate to take some action, and that's what we did," Overland said.

Overland stressed the overwhelming number of Islamic people in Australia and Melbourne were valued members of the community, not terrorists.

He didn't rule out further arrests in association with the raids, but said no-one had been apprehended overseas.

Overland said the suspects had conducted reconnaissance at the Holsworthy army barracks in outer south-western Sydney.

There had also been "suspicious activity around other bases" which he was not prepared to identify.

Overland said that he was "extremely disappointed" by leaks that lead to reporting of the raids in 'The Australian' newspaper.

"We will be vigorously pursuing the leak from my end and I expect that the federal authorities will be doing the same," Overland said.

"This, in my view, represents an unacceptable risk to the operation, an unacceptable risk to my staff," Overland said, adding "It's a risk that I take extremely seriously and is cause for great concern."

Victoria Police and the Australian Federal Police executed 19 search warrants at homes in Glenroy, Carlton, Meadow Heights, Roxburgh Park, Broadmeadows, Westmeadows, Preston, Epping and Colac about 4.30am.

Police have set up a crime scene at the corner of View and Glen streets, Glenroy, in Melbourne's north.

Police have also blocked off View Street in both directions. Investigators are loading equipment into the house, while they wait for the arrival of forensic chemists.

A small pale green weatherboard house, three doors along from the corner of Glen Street, was among those raided.