Allen, who had been trying to make the men's 4 x 100m relay team for the Beijing Olympics, has been charged with importing steroids.

Moments before he was arrested, Allen, 30, had declared this weekend's Gift was to be his last.

He won't be making the trip to Stawell now.

Allen is facing a significant ban under IAAF anti-doping rules if convicted.

Allen, of Toowoomba, Qld, was charged with drug-related offences including knowingly importing a tier one good, relating to nandrolone, turinado and testosterone.

He was also charged with attempting to possess a drug of dependence.

Three detectives were waiting for Allen when he arrived at the State Library yesterday.

After watching him play a central part in the press conference, then pose in the sponsor's silks, police made their move.

The sprinter's car was searched and he was taken to the Boroondara CIU in Kew where he was interviewed for several hours.

Allen's arrest came after a joint investigation by officers from Victoria Police and the Australian Customs Service.

He was bailed to appear in Melbourne Magistrates' Court on May 21.

Allen won last year's Gift - and $40,000 - off a handicap of 5.25m in a time of 12.35 seconds.

His handicap mark was brought in to 2.25m for the 2008 race, which he said would be his last Stawell campaign.

It is understood he was not drug tested after winning the Gift.

"In the light of recent events involving myself in regards to a police matter I think it is in everyone's best interests and especially that of the Stawell Gift if I stood down from competing in this year's event,'' Allen said in a statement to the Stawell Athletic Club.

"I believe it is wrong for me to compete until the conclusion of these police matters is heard.

"I truly hope that this year's event can be a success and I am sorry for the negative press that this affair has created.''

Possession or trafficking of banned substances are breaches of the International Association of Athletics Federations' anti-doping rules.

The heats of the world's oldest professional footrace are run at Central Park in Stawell on Saturday, with the semi-finals and final on Easter Monday.

Former Stawell Gift winner Jason Richardson said it was another sad day for the sport of athletics.

"It's not a great surprise,'' the 1993 Gift champion told Radio SEN.

''... Police surely wouldn't make charges without a whole stack of evidence.

"I know at the moment it is allegedly, he's been allegedly charged with distributing anabolic steroids in the form of nandrolone.

"It's a sad day once again for the sport and a sad day for the Stawell Gift, it's on this weekend ... we get this incident coming to light and it's sad.

"But you know what, if it is all true it's great that they caught him and try to kick him out of the sport.''

Allen edged out training partner Nick Sampieri by one hundredth of a second to claim a dramatic victory in last year's Gift final, with the words "never forget what Brima said'' scrawled on his forearm.

The comment referred to a perceived slight the previous year to Allen from Steve Brimacombe, the 1991 Gift winner and coach of the 2006 victor Adrian Mott.

Allen and his coach later got matching tattoos on their arms to commemorate the 2007 win.

"Before the race I remember I just had a massive confidence that I was going to win,'' Allen said at today's launch, shortly before being arrested.

He admitted he struggled for motivation at times after the victory, prompting the decision to make the 2008 Gift campaign his last.

"I decided I wanted to finish up being on top,'' he said.

"All I ever wanted to do was run in the red (the backmarkers jersey) and I achieved that ... I don't want to be the sort of person that keeps running to get my handicap back out again.''

Allen competed throughout the Australian domestic season as he pursued his goal of making the Olympic team.

But that ended when he could only finish seventh in the first round at last month's Olympic trials.

Allen had been training himself over recent months after splitting with his long-term coach.

- with AAP