Four people have been arrested after allegedly using a stolen Mercedes to steal another vehicle in Melbourne this morning.

Police allege a man armed with a knife jumped out of a stolen black Mercedes on Wingrove Street, Fairfield, about 8am and approached a woman who was walking down the street.

Police arrested three people on the Metropolitan Ring Road. (9NEWS)

He allegedly demanded that she hand over cash before fleeing the scene.

The same car was later spotted in Gillwell Crescent, Lalor, where a man allegedly demanded a resident hand over the keys to his white Mercedes.

Two other offenders then entered the resident’s garage and fled the scene in the white car, police said.

Police caught up with the black Mercedes on the Metropolitan Ring Road, in Thomastown. Two men and a woman, all aged 23, were arrested at the scene.

A 25-year-old from Preston was later arrested after police allegedly found the white Mercedes at his home.

All four people are currently being questioned by police.