Official commemorations kicked off with a flag-raising ceremony at Government House before thousands gathered for a major Invasion Day rally through the city centre.
Acting Premier Jacinta Allan and Governor Linda Dessau both touched on divisions over the the date of Australia Day as Ms Dessau urged people with opposing views to listen to what the other had to say on the difficult topic.
"It takes effort to listen to each other, it takes insight and good will to acknowledge that decent people can hold different views," she told the crowd.
"That they can hold their views strongly without one being immovably right and the other wrong, or one good and the other evil."
For the third year in a row, there is no Australia Day parade through Melbourne city but Federation Square is hosting a family-friendly festival with free entertainment and food.
Thousands of solemn Victorians, many wearing T-shirts emblazoned with Aboriginal flags, gathered outside the state's parliament, joining in calls for justice ahead of a march through Melbourne's CBD.
Speakers at the rally decried Indigenous deaths in custody and several spoke out against the voice referendum - although it was made clear the rally did not specifically back a "no" campaign.
Cries of "shame", "f*** Australia Day" and "sovereignty" rang out from speakers and the crowd.
Greens Senator Lidia Thorpe was welcomed with a loud cheer before she told the crowd a war had been declared on Indigenous people over 200 years ago.
"They are still killing us, they are still stealing our babies, they are killing our men, and they are still raping our women," she said.
First Peoples' Assembly of Victoria co-chair Marcus Stewart earlier said people against a voice were "out of step with the views held by the vast majority of our mob."
"It's hard to watch a handful of outliers hijack the rally and attempt to destroy the most significant opportunity we've had to create meaningful structural change at a federal level by fuelling the 'no' campaign against a voice to parliament," he said.
A 21-gun salute took place at the Shrine of Remembrance before the Roulettes conducted an air display above Melbourne.
The work of Indigenous musicians and artists were showcased at the free Share the Spirit Festival at the Sidney Myer Music Bowl.
Dawn services were held in Kings Domain, St Kilda and other locations around the state to mark what is a solemn day for many Aboriginal and Torres Strait Islander people.
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