Images from the scene showed the carriages had come completely off the tracks - one on its side and others at an angle - several metres from the railway line.
Victoria Ambulance said police had confirmed two people had died. It said paramedics were treating the injured at the scene and one person had been airlifted to hospital.
One passenger, Dr Scott Rickard, said a few people in her carriage were hurt, including the train driver.
"The train crashed," she tweeted. "We just suddenly slid into a fast stop, carriage at an angle, stuff flying everywhere.
"We're in a bit of shock, but ok. Drinking cuppas now. Waiting for a lift to collect us."
