Numan Haider, 18, was killed by a single bullet as he attacked officers outside the Endeavour Hills police station in September 2014.
Police had asked to meet him there to discuss his recent behaviour to assess what it meant for national security.
Haider had been under surveillance from counter-terrorism police for several months.
One of the teenager’s friends, Ljindim Sulejmani, was with him in the hours before his death and has given evidence to the coronial inquest.
Mr Sulejmani, 26, told the hearing he believed Haider “snapped” and stabbed the police officers because of pressure he was dealing with from his parents and ASIO.
He said he had witnessed Haider’s parents physically attack him for praying at the mosque twice daily.
They told him to “stop praying at the mosque, only extremists pray at the mosque”, the court heard.
Haider told Mr Sulejmani “they [his parents] hate me because I pray and attend the mosque too much”.
The 18-year-old’s passport was cancelled the day before he lashed out at police.
He had wanted to travel to Afghanistan with his parents to find a wife.
Mr Sulejmani said his passport cancellation followed harassment by ASIO officers who had been speaking with Haider’s parents.
While giving evidence, Mr Sulejmani made strong statements against the Islamic State group.
He said he was totally against violence and extremism and believes “Islamic State members have totally misinterpreted everything in the Koran”.
Mr Sulejmani said Haider never expressed any extreme views and described him as “fragile and harmless”.
He said Haider seemed “very collected and calm” in the hours before his death but said his friend “really hid his emotions very well”.
Haider in secret relationship, inquest hears
Mr Sulejmani said Haider had also recently ended a relationship with a woman and the stress of it contributed to him reaching breaking point when he attacked police.
The inquest heard from Haider’s former girlfriend Jinali Surendar, mentioned in Mr Sulejmani’s evidence.
The pair had become engaged in a religious ceremony but broke up two months before his death.
She had never been introduced to his family as she said they would not have approved because she was Australian-born of Sri Lankan background.
Ms Surendar told the hearing she was confused by the events that led to Haider’s death.
“Something had obviously gone wrong in the two months since we broke up,” she said.
“I’m so confused, it’s a total waste of life.”
Ms Surendar was with Haider when he waved a Shahada flag at police at Dandenong plaza.
She said it was now clear he was very frustrated with police and believed it was because his passport had been cancelled.
Another teen arrested was excused from giving evidence
One of the teenagers arrested during raids last April, relating to an alleged Anzac Day terror plot, has been excused from giving evidence at the inquest.
Harun Causevic was friends with Haider and has previously been the subject of terror charges.
He attended court today to lodge the application which was granted by coroner John Olle.
Another witness, who cannot be named for legal reasons, has also been excused from giving evidence.