It’s understood Australia’s foreign interference taskforce is investigating the vehicle.
A photo of a grey Nissan with Chinese characters on its bonnet and side reading “police” and “special police” appeared on Reddit on Sunday.
The car also featured a purple shield logo used on official police cars in China.
The user who posted the photo said they had reported the car to local police, who indicated they had received five calls in 90 minutes about the same vehicle.
The poster also said the Australian Security Intelligence Organisation had contacted them about the location of the vehicle.
Similar Chinese police cars have been spotted in Australia in the past, including in Adelaide in 2019 during the height of the pro-Hong Kong democracy protests.
Foreign affairs expert Greg Barton told 7NEWS the sighting of the vehicle may cause concern for some people who have said unfavourable things about the Chinese state.
“For people who have concerns about things they’ve said … this kind of thing is very worrying,” he said.
It’s not clear if the vehicles are funded directly by the Chinese Communist Party.
“The more plausible scenario … is that someone has done it with a nod and a wink from Chinese authorities at least feeling assured that they’re not going to be punished by Chinese authorities,” Barton said.
In Victoria, there are laws against impersonating a police officer or a police vehicle, however the laws do not extend to the impersonation of foreign authorities.
Victoria Police say no criminal offence has been committed.
7NEWS understands Australia’s Countering Foreign Interference Taskforce is now investigating the vehicle.
The sighting of the vehicle comes as two Chinese nationals were arrested on Tuesday on charges of operating an illegal police station in New York City.
The Justice Department said the station was being used to “monitor and intimidate” critics of the Chinese government.
The two men are expected to be arraigned on conspiring to act as agents of the People’s Republic of China and obstruction of justice.