Dramatic video footage has emerged of the moments after a man pulled out a knife and stabbed two passengers on a tram in Footscray on Friday night.

Footage filmed on a bystander's smartphone shows a man, who has been dragged from the stationary route 82 tram, lying in the middle of Geelong Road as a witness uses a piece of clothing to apply pressure to what is believed to be a stab wound.

A police siren can be heard blaring in the background before officers can be seen rushing to the man's aid.

A panicked witnesses can be heard asking one of the police officers if the offender was "still on the loose".