Police in Britain have arrested a 14-year-old boy in connection with an alleged Islamic State-inspired terror plot in Melbourne on Anzac Day.

The boy was arrested on Saturday "on suspicion of being concerned in the commission, preparation or instigation of acts of terrorism and remains in police custody for questioning," Greater Manchester Police in north-west England said in a statement.

"Following the examination of a number of electronic devices, the North West Counter Terrorism Unit and officers from Lancashire Constabulary executed a warrant at an address in Blackburn, Lancashire," the statement read.

Detective Chief Superintendent Tony Mole, from the North West Counter Terrorism Unit (NWCTU), said: "We have uncovered communication between an individual in the North West and a man in Australia to what we believe is a credible terrorist threat."

"As soon as this information came to light we acted quickly with the relevant authorities here and abroad and this has resulted with officers from the NWCTU arresting a teenager," he said.

"The nature of the communication is currently under full assessment and subject to investigation."

Victoria Police said in a statement that investigators "received information from UK authorities after they allegedly uncovered communications between the teenager and a man in Australia".

"Victoria Police and the Australian Federal Police can confirm a link between the arrest of a 14-year-old boy in Blackburn, Lancashire in the United Kingdom on Saturday with Operation Rising, a Joint Counter Terrorism Team operation," the statement said.

Police have declined to expand on the nature of the communication, saying it would form part of the investigation and "therefore it would be inappropriate to comment further".

Police said the boy had previously been arrested on April 2 after they examined electronic devices.

They stressed they had not uncovered any evidence of an imminent attack being planned in Britain.

Two men remain in custody after Melbourne after early morning counterterrorism raids were conducted over the weekend.

Sevdet Besim, 18, of Hallam, was charged with conspiring to commit a terrorist act and a second man was charged with weapons offences.

Another man is being held under a Preventative Detention Order (PDO) which allows him to be held for 14 days — the first time such an order has been used in Victoria.

Two other men were released without charge.

Police to step up security on Anzac Day

Unprecedented levels of security will be in place at Melbourne's Anzac Day dawn service and events across Victoria as a result of the raids.

Acting Police Commissioner Tim Cartwright said Melbourne's dawn service will be a key focus for officers.

"We will see several hundred police present, we will see physical security arrangements in place which we won't have seen before," he said.

"There are other arrangements which will not be visible.

"We are not restricting ourselves to the dawn service nor just to Melbourne and the Anzac Day events on that day.

"We are looking right across Victoria for the events that relate to Anzac Day."

Victorian Premier Daniel Andrews said the public heading out to events such as the football at the MCG should be reassured that police were working to ensure their safety.

"Whether it be at the shrine, other events that will occur in the suburbs and regional centres and indeed at the MCG, the rugby that evening," he said.

"I'm very confident that everything that can be done, is being done to keep Victorians safe."

ABC/AFP