Geoscience Australia has confirmed Melbourne recorded a 5.8 magnitude earthquake at 11.15am NZ time.
The epicentre of the earthquake was near Mansfield, Victoria, and was recorded at a depth of approximately 10km, which is understood to be relatively shallow for an earthquake.
A magnitude 4.0 aftershock was also felt 15 minutes later.
Mansfield, Victoria is located about 150km northwest of Melbourne and the 5.8 magnitude quake could be the largest Australia has felt for some time.
Tarawha Hunt of Ngaiterangi, who lives and works in Campbellfield, Victoria two hours away from Mansfield said he was on a morning tea break when the whole building started to shake and then he saw people run to the nearest exit doors.
“I had just made it outside to go on a break and the building started to shake and then seeing people running towards me to the exit door.”
Speaking from Washington DC, Prime Minister Scott Morrison said there had been no reports of serious injuries at this stage.
"That is very good news, and we hope that good news will continue," he says.
Morrison says that earthquakes of this magnitude are rare in Australia and he says, "As a result, I'm sure, people would have been quite distressed and disturbed by that particularly in the most immediate area affected."
Morrison said Emergency Management Australia was liaising with state authorities.
Images of minor damage to buildings have flooded social media, with Chapel Street in South Yarra appearing badly hit with damage.
Video shows rubble scattered across the ground after building walls collapsed, prompting falling bricks to smash across the street.
Dozens of locals have been standing around in shock over the quake.
The Chapel Street area has been cordoned off while authorities assess the damage.
New Zealand's GeoNet tweeted: "This is the largest on-land earthquake in Australia since 1997. Earthquakes in Australia are reasonably uncommon, being far from the active tectonic zones of the Australian plate (like the one we live on!)"
The earthquake was felt 190km away in Melbourne from Mansfield as well as in regional Victoria, Sydney, regional New South Wales, the ACT, Adelaide and Launceston in Tasmania.
Melbourne's Seismology Centre says the earthquake lasted about 20 seconds.
Melbourne is the country’s second-largest city and is home to five million people.
The city is also in lockdown due to a recent wave of coronavirus cases.