Buninyong residents and businesses were left shocked after a man was arrested following a hostage situation early Tuesday morning.

A man armed with a firearm reportedly took a woman hostage about 1.45am before being found by police later that morning.

The woman was able to get away from the perpetrator, sustaining minor injuries.

Three Warrenheip Street shopfronts sustained damage in the fracas, with windows broken at a cafe, bank and post office.

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The entire township was placed under a precautionary lockdown for some time this morning while police searched the area.

Police said no charges had been laid and the offender was still to be interviewed and being treated for injuries sustained in the arrest.

Meanwhile, two Buninyong Bakehouse employees reportedly witnessed the scene and called triple zero.

Buninyong Bakehouse owner Ashley Murphy said the two employees were scared by the incident but were glad the woman was safe.

"It was a little bit scary for them, a little bit full on. They weren't far off their shift ending anyway, but because Buninyong got locked down, they didn't know if they could actually leave," he said.

"They were in good spirits, they were a little bit shocked and what not, but obviously concerned for the welfare of the girl."

Mr Murphy said the thought of something so volatile happening in Buninyong was scary.

"You get a few little odds and ends happening out here but something of this nature, it's quite horrific, really," he said.

"It puts a little bit of a scare into the community, especially when it was all locked down like it was and people were getting told to turn away and don't open the businesses."

Police based themselves at the service station and newsagency for much of the morning while carrying out the search.

Buninyong News employee Rory Barnett said it was 'unsettling' to think something like that could happen in the town.

"It was surprising, honestly. You just think of Buninyong as a small town, local, very friendly, but I've never experienced anything like this before, so it's interesting to see and quite surprising," she said.

"Kind of unsettling. You don't normally think that people are roaming around with weapons on the loose in a community that you're so familiar with."

Business owners were in shock as they arrived at work on Tuesday morning, finding their shopfronts damaged in the incident.

Maggie and Kate owner Katrine Taylor described the events as 'surreal'.

"I'm still kind of going 'does this really happen in Buninyong?'. I just can't believe it, I'm still in shock, I think," she said.

"I think we still have that country town feel out here and that perception that things like that don't happen near us.

"I'm sure anytime something like this happens, it's a shock factor but for us, it's like 'do things like this happen in Buninyong or even in Ballarat?'. I don't know how to describe it except being in shock."

Buninyong Post Office owner Yao Zhao said he was alerted to a broken window about 2.30am in the morning but was blocked from getting to his business by police.

"I only got into the post office about 7am and realised we had four broken windows at the front and the coffee shop had one broken window too," he said.

"In a small town like Buninyong, we never expect something like this.

"Just unnormal. Nothing like this has ever happened before. We live in a very secure community here, but it's just bizarre."

UPDATE, 7.30AM: Police have arrested a man after a hostage incident involving a gun in Buninyong this morning.

According to police, the man took a woman known to him hostage while armed with a firearm about 1.45am.

He assaulted the woman before releasing her.

She sustained minor injuries.

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Police swarmed the Buninyong area this morning while they searched for the man.

Nobody was able to enter the town while the search unfolded, with major roads blocked to traffic.

Police found the man about 6.30am and he was arrested.

He sustained a dog bite during the incident.

EARLIER: A major police operation is unfolding in Buninyong this morning.

Police have blocked off Geelong Road, heading into the town from Mt Helen.

The road, as well as many others, have been blocked off for a number of hours.

It is understood there is a potential hostage situation unfolding, but police are unwilling to comment.

There are unconfirmed reports of a gun being involved.

There is a heavy police presence in the area and all traffic has been blocked.

It is not known how long the road will remain blocked.

The Courier has contacted Victoria Police and is awaiting further information.

This page will be updated as more information comes to light.

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