A stand-off in Melbourne's north-east has ended with the arrest of a man who had earlier been seen in the area armed with a chainsaw.

The drama put nearby schools into lockdown on Friday afternoon and triggered a major police response.

Students at St Helena Secondary College and Glen Katherine Primary School in Eltham were ordered to stay indoors after the man was seen carrying a chainsaw along Parry Road at about 1pm on Friday.

Several other people in the area took cover in their cars.