Police gave no details of casualties.
But multiple outlets including public broadcaster ABC said the confrontation had left two police dead, one wounded, and the shooter still on the run.
The violent encounter took place in Porepunkah, which lies at the foot of a mountain in northeast Victoria, police and media said.
"This is still an active incident and we will provide more information when it's operationally safe to do so. We ask people avoid the area," Victoria's police service said in a statement.
The Age newspaper said police were at the property to execute a warrant for historical sex abuse allegations, without giving further details.