Victorian police are defending the actions of officers who shot dead a 15-year-old boy in Melbourne's inner-east last night.

Police used capsicum spray unsuccessfully and fired a warning shot into the ground before three officers shot the boy in the chest in the suburb of Northcote.

The 15-year-old was armed with knives believed to have been stolen from a local shop. Police say his family had earlier stopped him from taking knives from the family home.

Assistant Commissioner Tim Cartwright says officers acted correctly and rejected claims that they were trigger happy. It is not known how many shots hit the boy.

"When you step through the events and look at the investigation we've conducted today the members have done everything they can," he said.

"They've tried to talk him down, they've deployed OC foam, they've backed off.

"At the end of the day one of our member's lives was at risk from what we can tell, three members have then seen fit to defend that member and open fire."

Julian Burnside QC, the immediate past president of Liberty Victoria, says the incident is a sad reminder of the old days of Victoria Police being too heavy-handed with guns.

"I must say, it's a very upsetting story, you've got a 15-year-old kid acting badly, he's got some knives, and you've got three policemen with pistols," he said.

"It doesn't sound like a fair match, to bring him down in a hail of bullets seems like an over-reaction.

"There may be more to it, we don't know yet, but I really do wonder why ... just one policeman might not have shot at his arm or shot at his leg.

"But for three police men to open fire and kill a boy who's just got a couple of knives, looks like an over-reaction."

The Police Association's Greg Davies says the officers acted appropriately, but he says the shooting shows that police need more options when confronted with violence.

"The Police Association for a number of years has been calling for the issue of Tasers as a non-lethal alternative option," he said.

"We can't say whether Tasers would have been used or could have been used in last night's incident, but clearly it would have at least provided another option."

Witnesses

Witness Hariet Stewart says she was in the car park and saw the boy before he was shot.

"There was a kid, and he had two big cleaver knives. He screamed - he did this kind of big roar - and I turned around and he was walking kind of angrily along with these two knives so I hid behind a tree," she said.

"I then heard the police rushing over and then I heard what was probably about seven or eight gunshots."

Ms Stewart says she thought the teenager may have been on drugs.

"My suspicion was that he looked like he was on ice, he looked really angry and also really irrational, which is why I hid," she said.

"I think it's awful, especially with what's happened in Athens, police killing people, there's just no excuse.

"It was terrifying, but he was just a kid, and I think it's outrageous."

Another witness, George Markopoulos, says he was across the road when he heard two warning shots.

"After that, I heard about four shots being fired and a few people screaming," he said.

"I went over to the area, and they told me someone had been shot."

Mr Markopoulos lives in the area, and says it is a normally a peaceful place.

"At the skate park you do get young kids playing around, graffiti, do all sorts of things, but not to the point like this where someone's running around with knives and getting shot," he said.

Father Peter Norden from the Victorian Criminal Justice Coalition wants an independent investigation into the fatal shooting.

The Coalition represents more than 50 legal, academic and community service organisations involved with the criminal justice system.

Father Norden is warning against a "closed shop" investigation by police, to justify the use of deadly force.

"The use of capsicum spray and a violent confrontation is often the worst possible response to a young person displaying emotional or psychiatric symptoms," he said.

"The Victorian community calls for a more sophisticated response in dealing with disturbed individuals, particularly very young people.

"Community agencies working with disturbed young people deal with serious incidents of this kind every evening, without resorting to a violent response."

Homicide detectives and Ethical Standards police are investigating the shooting.