Large parts of the street in Greenvale remain blocked off as members of the bomb squad search the property.
Balaclava-clad officers with assault rifles are standing guard around a two-storey home and heavily armoured vehicles are parked in the street.
It is not yet clear if anyone has been arrested.
Police are yet to reveal why they launched the raids or whom they were targeting.
A neighbour told Channel Ten he heard something that sounded like gunshots around midday.
“Then the neighbours called the cops, and all of a sudden we saw cops arrive,” he said.
“It was like a bomb squad or something. They just said they believed to be some explosives in the house.”
The raids come just weeks after police arrested several teenagers during anti-terror raids in Melbourne’s south-east.
It is alleged those involved were conspiring to commit a terrorist attack on Anzac Day in Melbourne.
Harun Causevic, 18, appeared in court today over the matter and was refused bail by a Melbourne magistrate.
Earlier today it was revealed Victoria Police had ramped up security measures for its officers.
Police in Victoria will no longer be allowed to work alone under new safety procedures put in place because of heightened security concerns.
- Police conduct raids in Melbourne (sbs.com.au)
- Police uncover explosives during antiterrorism raids in Melbourne (abc.net.au)
- Counter-terror raid under way in Melbourne (theguardian.com)
- Australia police foil Islamic State-style terror attacks (rediff.com)
- Five arrested in Australia over ‘Anzac Day terror plot’ (itv.com)