Police have charged a man involved in an altercation which resulted in officers shooting a woman dead.

The woman was shot as she drove a car at cops on Saturday while they were attempting to arrest an armed man.

WATCH THE VIDEO ABOVE: Woman fatally shot by police.

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Victorian police officers were called to Cecil St in South Melbourne about 5pm, following reports of a male wielding a machete.

As police were arresting the 39-year-old South Melbourne man for allegedly possessing a prohibited weapon, a woman drove an SUV at them, striking one officer.

7NEWS understands the senior constable was pinned between the car and a wall.

The officer fired four shots at the car, hitting the 34-year-old driver and her 26-year-old passenger.

The 34-year-old female driver of no fixed address died at the scene.

A 26-year-old St Kilda man received gunshot wounds to his leg and was taken to hospital with non-life-threatening injuries.

The senior constable struck by the vehicle was hospitalised with non-life-threatening leg injuries and has since been released.

Acting Assistant Commissioner Therese Fitzgerald said the officer was “extremely lucky” he wasn’t severely injured.

His partner, who was unharmed, did not fire his gun.

Fitzgerald said the pair in the car were known to police and were driving with allegedly stolen South Australian number plates.

It remains unknown how all three people involved are known to each other.

Fitzgerald believes the officer who fired his gun responded in accordance with his training.

“The police members are trained to respond in a certain way and that’s what’s taken place,” she said on Sunrise.

A 39-year-old South Melbourne man has since been charged with possessing a prohibited weapon and theft of a bicycle.

He was bailed to appear at Melbourne Magistrates’ Court on August 12.