A taxi driver was fatally stabbed, and his attacker died in an accident within a few minutes in Melbourne's east.

"The taxi driver has upper body injuries and is middle-aged," Det-Sen-Sgt David Snare told Daily Telegraph.

"It's a tragic set of circumstances. It seems to be a taxi driver going about his lawful business and for whatever reason, there's been some sort of confrontation and he's now deceased," Detective Snare said.

The cab driver attacker also dies

The stabbing victim's cab was stolen by his attacker, who drove off and later crashed onto a pole by the fence of a Mount Waverley house. The cab immediately caught fire upon collision, not far from where the taxi driver's body was dumped.

Two young men from the nearby house got out to ask the "cab driver" if he was okay. The witnesses had no idea the man in the cab had just fatally assaulted the cab's actual driver.

The man then jumped out of the car and tried to run away. He was dead before emergency services arrived.

Police officers are still investigating whether the attacker was a passenger.

Melbourne taxi drivers in shock

Victorian Taxi Association spokesman David Samuel told reporters he was "shocked and appalled" by the fatal assault on one of their own. The assault victim had been driving cabs for 30 years.

Mr Samuel lamented other attacks on cab drivers in Victoria.

"It comes on top of a number of events, which luckily did not lead to deaths," he said.

Taxi driver Murray McRae, interviewed by the Herald Sun, said he no longer worked after midnight as a safety measure. He has been driving cabs for 19 years.

Meanwhile, Taxi Industry Stakeholders Victoria spokesman David Brumby urged taxi drivers to keep calm.

"The last time there was a death of a driver there was a reaction and the city was grid locked for days," he told radio station 3AW.

Mr Brumby called on cab drivers to "show respect for the driver and support his family. We need to work on the prevention rather than have a reaction to this."

He described Melbourne to be "violent" at night, and "taxi drivers are in the firing line."

Authorities have contacted Victorian Taxi Directorate in a bid to get a CCTV footage of the incident.