Melb man on run after police chase

A man who led police on a dramatic car chase through Melbourne, before fleeing in a taxi, is still on the run.

The man, who police say could be armed, was last seen leaving in a taxi in East Melbourne after he dumped his black BMW in a city side street on Tuesday afternoon.

Police say they know the identity of the driver, and are urging him to hand himself in.

Uniformed police initially approached the driver near the intersection of Queen Street and A'Beckett Street about midday after a tip-off from the public about a drug deal taking place.

As officers tried to arrest him, the driver fled the scene in his BMW - ramming two police vehicles on his way.

Eye witnesses told police they saw the driver throw money from the car during the chase, before eventually abandoning the car and catching a taxi from Spencer Street.

The driver reportedly had blood on his face.

No shots were fired during the confrontation amid reports the driver may have been armed and damage to the BMW's windscreen, police say.

"There have been reports the male was armed. Police are still investigating those reports, and it has not been confirmed," Inspector Paul Tymms told reporters on Tuesday.

Police, on Wednesday, confirmed the taxi driver had come forward and was helping police.