Police find body at Donvale while searching for missing woman Penny Bailey

UPDATE: An autopsy will be carried out on the body of a woman thought to be that of missing Melbourne mother Penny Bailey, which was found in the city's east on Thursday night.

Homicide detectives made the grim find in bush near the Mullum Mullum Creek at Donvale shortly after 7pm on Thursday.

"The body has not been formally identified but is believed to be that of missing woman Penny Baile," a police spokeswoman said.

The 59-year-old mother of three was last seen on Sunday after having dinner with one of her daughters.

She shared a home in Mont Albert with her 34-year-old son Stephen Bailey, who was arrested on Wednesday night following a public appeal for him to come forward in relation to his mother's disappearance.

He is under police guard in the Royal Melbourne Hospital and is not yet fit to be interviewed by detectives.

He was arrested wearing only underpants on a busy Flemington road on Wednesday night, according to a witness.

Homicide detectives were called in to investigate Ms Bailey's disappearance on Tuesday night after signs of a struggle were found inside her Mont Albert townhouse.

Ms Bailey, 59, was last seen in "good spirits" about 9pm on Sunday, after having dinner with one of her daughters.

Her siblings and daughters are believed to have had to force their way into the townhouse on Tuesday after being unable to contact her.

Mr Bailey was also reported missing on Tuesday night.

Ms Bailey's daughters, Belinda and Shannon, made an emotional appeal for Stephen to come forward following their mother's disappearance.

"I'm just asking you, Stephen, to please come forward ... in whatever way you can," said Belinda.

"We love you and just want to hear from you soon.

"Mum, I love you, I miss you and I'm worried about you."

Mr Bailey was last seen by a family member about 11.45am on Tuesday at the home, and police identified him on CCTV in the Lonsdale and Bourke Street areas in the CBD between 6.30am and 7am Wednesday.

While Mr Bailey was out walking in the city, police were setting up a crime scene at the home he shared with his mother. They seized two wheelie bins from the nature strip, as well as a mobile phone and other items, Fairfax Media reports.

"Homicide squad have been at that address this morning and there are concerns from what we've witnessed from that scene," Detective Inspector Mick Hughes said on Wednesday.

He would not elaborate but described the scene as concerning enough to see his squad become "actively involved".

Bags of evidence were removed from the property and vehicles left there have been tested forensically.

Morning news break - October 9