A 23-year-old man is in a serious but stable condition after being struck by an unmarked police car in Alice Springs.

Key points: The 23-year-old was hit by an unmarked police car at 8:20pm on Monday night.

The 23-year-old was hit by an unmarked police car at 8:20pm on Monday night. Police said the man was reported to have been armed with a knife

Police said the man was reported to have been armed with a knife An investigation has been opened into the collision, which has been deemed a "serious custody incident"

The man's condition was downgraded on Tuesday morning from critical, an SA Health spokesperson confirmed.

The man was last night flown to Royal Adelaide Hospital.

Northern Territory Police said the collision was being investigated as a "serious custody incident".

NT Police said the man was believed to be armed with a knife when he was struck on Nicker Crescent in Gillen.

Friends and family wait outside Alice Springs Hospital for news of the 23-year-old's condition. ( ABC News: Oliver Gordon )

"About 8:20pm last night a member of the public called police reporting a male with a weapon," NT Police Southern Region Commander Brad Currie told the ABC.

"Police attended the scene and the male fled on foot and on Nicker Crescent where that incident occurred.

"Police were in vehicles and attempted to apprehend that male. Unfortunately there's been a collision between the police vehicle and the male, which remains under investigation at this stage.

The 23-year-old was transported to Royal Adelaide Hospital in a critical condition. ( ABC News: Emma Sleath )

Commander Currie told a press conference late on Tuesday a knife had been found at the scene of the collision.

"I can confirm the weapon was a knife," he said.

He said a number of officers were pursuing the man in cars and on foot when the collision occurred.

A statement from NT Police said, "Police administered first aid until St John Ambulance arrived and transported the man to hospital".

Commander Currie said the serious custody incident will be investigated internally by NT Police.

"We have an independent officer coming in from Darwin to take over the investigation," he said.

"[The investigation] will have oversight by the police standards command, which is oversighted by the ombudsman's office, and the investigation file will be provided."

Commander Currie said the 23-year-old was being pursued for an incident at a business on Larapinta Drive, Araluen.

The incident comes just over a week after the death in custody of 19-year-old Kumanjayi Walker in the Indigenous community of Yuendumu, 266 kilometres north-west of Alice Springs.

It's alleged Mr Walker was shot and killed during an attempted arrest.

Constable Zachary Rolfe, 28, has been charged with the murder of Mr Walker.

The NT Police Association has indicated Mr Rolfe intends to plead not guilty.

Commander Currie said the police vehicle was unmarked. ( ABC News: Neda Vanovac )

Mr Walker's death sparked rallies in Alice Springs and around the country.

When asked on ABC Radio Alice Springs what this latest incident would do for police relations after Mr Walker's death, Commander Currie said "it had been a difficult couple of weeks" and police would "continue to work with members of the public and organisations across Alice Springs and the southern region to ensure [police] continue relationships with those groups".