Two police officers have been killed and a gunman remains at large after what is being described as an “ambush” in a rural town.

Victoria Police said the incident at the property in Porepunkah, about 300 kilometres north-east of Melbourne, remained active on Tuesday afternoon.

“We have deployed all specialist resources into the area to arrest the person responsible,” Police Commissioner Mike Bush said.

“This is a terribly tragic event for the police family, not just here but across the country. We all feel this.”

A group of 10 officers had attended the rural property on Tuesday morning to execute a search warrant.

Two officers were killed when a man shot at them. A third suffered lower body injuries and was flown to The Alfred hospital in Melbourne.

“Ambulance Victoria is on scene. Paramedics have treated one person for serious lower body injuries and transported them by air ambulance in a stable condition,” an Ambulance Victoria spokesperson said.

Victoria Police are yet to confirm any details, but it is being widely reported officers were at the property to serve a warrant for historic sex crimes.

News Corp is reporting officers were searching an abandoned bus when they were shot.

The gunman is believed to have taken at least one police-issue firearm from the scene. He remained on the run late on Tuesday, reportedly with family, including children, News Corp said.

Police have urged the public to stay clear of the dangerous and active situation in the town, which is otherwise known for its sweeping vineyards and scenery and has about 1000 residents.

“This is still an active incident and we will provide more information when it’s operationally safe to do so,” police said.

Locals said they had seen police cars and an ambulance heading into the town. Heavily armed officers from the Special Operations Group were also on the scene, near the base of Mount Buffalo in Victoria’s alpine region, on Tuesday afternoon.

Following the incident, Porepunkah Primary School went into lockdown. Principal Jill Gillies said the school practised drills all the time, so the children had remained calm and were being entertained in their classrooms with fun activities.

“We went into pre-emptive lockdown around 11.30am. We were told that there was a situation unfolding,” she told ABC radio.

“Just for the safety of the kids and just to keep everything nice and calm, we went into lockdown.”

The school has 104 children enrolled, and is in the centre of the small town.

Gillies said late on Tuesday afternoon that children would be allowed to go home. Those from the Porepunkah area would be able to be picked up by family, while those from further away would remain at the school.

“We don’t have many details, which is kind of ironic because we’re right in the heart of it,” she told Melbourne’s told 3AW.

“The community will rally around those affected.”

A massive police response as the incident unfolded. Photo: AAP

Alpine Shire Council announced the closure of all council facilities after 1pm on Tuesday. They included transfer stations, libraries, visitor information centres, depots and the Bright customer service centre and sports centre.

Prime Minister Anthony Albanese said the government’s thoughts were with the police, acknowledging there were “concerns” for “some of the police officers who are involved”.

“The men and women who wear our uniform and wear the uniform of the police force, take risks each and every day,” he said in Canberra.

Australian Federal Police Commissioner Reece Kershaw offered his thoughts and prayers to Victoria Police on behalf of the wider police blue family.

-with AAP