Melbourne was also the scene of two fatal car-ramming incidents past year, but neither was linked by police to terrorism.
The deceased suspect had stabbed three people, leaving one dead and two others injured but they are not believed to be life-threatening wounds. Eventually, one shot him in the chest, and he was arrested by plain-clothes policemen. One died in the hospital, Ashton said.
Chief Commissioner Graham Ashton said on Saturday the Somalian-born Khalif, also known as Hassan Shire, was the brother of a man arrested by police late a year ago in relation to committing acts in preparation for a terrorist attack.
"There were gas cylinders in the vehicle which had been turned to the open position".
Officers said they "are not looking for anyone further at this early stage" and there was no immediate evidence of an ongoing threat related to the attack.
Khalif was known to police and federal intelligence authority ASIO.
"Look, he is someone that was known to us but the information that we had through the night, we with working on, he wasn't somebody that we were actively monitoring to that we were actively monitoring to that level in relation to his activities, no".
Ashton said the attacker - who was shot by police and died 30 minutes later in custody -was known by the authorities because of family connections and had been in Australia for decades, coming from Somalia.
"We don't train people to wound people with firearms".
Commissioner Ashton also says there was no suggestion that Khalif was inspired by James "Dimitrious" Gargasoulas, who is now on trial facing six charges of murder after allegedly mowing down pedestrians in January 2017.
However, blowhard ISIS propagandists frequently claim responsibility for attacks they have nothing to do with.
He used his vehicle, a Holden Rodeo loaded with gas cylinders, to start a fire, first hitting a pedestrian and then mounting the pavement and causing an explosion.
The death cult said in a statement: "The perpetrator of the operation... in Melbourne... was an Islamic State fighter and carried out the operation... to target nationals of the coalition' fighting IS".
The mayor of Melbourne, Sally Capp, posted a message of support after the attack.
After the explosion, the man used a large knife to attack shoppers, injuring 3 of them.
"Because he was on his stomach, they turned him over to see if he's alright; he was still alive", he told AAP.
Victorian Premier Daniel Andrews said the attack was "an evil, terrifying thing that's happened in our city".
Ali was later shot by police as he lunged at officers following the deadly attack at Bourke Street on Friday afternoon, bringing the shopping area to a standstill.
Streets around the crime scene would remain cordoned off until 8am on Saturday, Mr Ashton said.
Memories remain fresh of a fatal but not terror-related attack on the same street previous year, in which a man drove his vehicle at pedestrians at high speed, killing six people and wounding about 30. The driver is on trial.
Two hostages were killed during the 17-hour Sydney cafe siege by a "lone wolf" gunman who was inspired by Islamic State militants.