The 17-year-old was interviewed by the Major Collision Investigation Unit in Ballarat late on Sunday, but was released without charge pending further investigation.

Police are again appealing for witnesses who may have seen the stolen car early on Saturday.

Members from the Major Collision Investigation Unit on Monday morning interviewed businesses along Scott Parade in the hope of gathering CCTV footage of the stolen car. 

The arrest on Sunday followed a lengthy man-hunt after the teen, believed to be the driver of the stolen car, fled the scene of the horrific accident in Scott Parade about 2.40am Saturday.

He cannot be named for legal reasons.

Another 17-year-old was found unconscious in the wreckage and underwent life-saving brain surgery at the Alfred Hospital on Saturday afternoon. 

Police originally feared the passenger could die, but he remained in a serious, but stable condition on Monday. 

Major Collision Investigation Unit Acting Inspector Brad McArthur said police could stil charge the teenager who they released on Sunday. 

He said possible charges included failing to stop and render assistance after a life threatening collision, dangerous driving causing serious injury and other negligence offences. 

A section of Scott Parade remained closed for most of Saturday as Ballarat woke to news of the tragic smash. 

Acting Inspector McArthur said the car, a white Subaru Forester station wagon, was stolen from a Black Hill address between midnight and 3am Saturday.

He said the car was initially involved in a police pursuit in Grant Street about 2.30am after police attempted to intercept the vehicle for a routine check. 

But police terminated the pursuit after the car reached high speeds in Humffray Street North.

Acting Inspector McArthur said another police car then observed the stolen car crashed into a poll at the corner of Scott Parade and Ebden Street.   

He said the wet road and high speeds had played a significant role in the accident. 

The 17-year-old boy was found in the passenger seat, while the driver's side door was open and the driver had fled. 

The boy was wearing latex gloves and police said they found another pair of gloves nearby.

Investigators are appealing for anyone who may have witnessed the movements of the vehicle to come forward.

Anyone with information about the incident is urged to contact Crime Stoppers on 1800 333 000.