A psychiatric inmate is on suicide watch after being charged with the stabbing murders of two fellow inmates in a low-security unit of their secure Melbourne hospital.

Peko Lakovski is facing two counts of murder over the deaths of Raymond Splatt and Paul Notas at the Thomas Embling Hospital, a facility used by the criminal justice system, on Wednesday night.

All three men had been previously charged with murder, the two dead men over the deaths of their mothers.

Police allege Peko, 49, an involuntary patient at the psychiatric hospital, armed himself with a large kitchen knife and killed his 54-year-old roommate Splatt by stabbing him several times in the upper body.

Lakovski then allegedly went into the next room and stabbed Notas, 36, who was in bed.

Police say the first incident appeared to have been sparked by an argument between the two roommates, who were regarded as friends and went on fishing trips together on day passes.

Lakovski appeared quiet and calm when he was brought before the Melbourne Magistrates Court for a preliminary hearing.

His lawyer Sarah Westwood told the court he was on suicide watch and asked that he see a doctor urgently.

Magistrate Anne Goldsborough ordered Lakovski be transferred immediately to the acute assessment unit at the Melbourne Assessment Prison.

When she asked him if he had any questions, he quietly replied, "No, no thank you."

Police said a nurse at the hospital managed to hit an emergency alarm as Lakovski turned towards him brandishing the knife moments after Splatt and Notas were stabbed.

"One staff member has actually viewed the second stabbing and called and yelled out for the offender to stop," said Detective Sergeant Wayne Cheesman.

"When the offender has turned towards his direction holding the knife they both retreated. They have hit the duress alarm straight away."

Det Sgt Cheesman said other patients in the 18-bed unit locked themselves in their rooms after they heard Notas yelling and screaming.

When police arrived they found Notas still alive, but hospital staff were unsuccessful in their attempt to resuscitate him.

Det Sgt Cheesman said police then found Lakovski sitting on his bed, with bloodied clothes on the floor, and gave himself up without incident.

Lakovski was admitted to the hospital after being charged with murder in 2002.

Notas was sent to Thomas Embling after being found not guilty of the murder of his mother on mental impairment grounds after she died in a house fire in March 2005, while Splat was charged with the murder of his mother in 1984.

Det Sgt Cheesman said police were still investigating where the knife came from.

"Within the facility there are self-contained living quarters, so there's a kitchen and cooking facilities and there are knives in there," he said.

"We're still trying to ascertain where it came from."

Besieged Mental Health Minister Lisa Neville has ordered the state's chief psychiatrist, Ruth Vine, to investigate why the men were housed in the low-security Jardine unit at the hospital in Fairfield, in Melbourne's northeast.

Dr Vine told reporters there were security cameras throughout Thomas Embling, but not in the Jardine unit.

"Within the Jardine unit, patients are assessed to be able to be there because of a low level of risk," she said.

"There are 24-hour staff present, so there is quite regular and close interaction with staff, but it's a low security and that's why there is not internal cameras."

Premier John Brumby also said there would be a full inquiry.

Lakovski was remanded in custody until his committal mention hearing on March 15.