Meanwhile, the Liberals have inched ahead in Prahran with 36.24 per cent of the vote compared to 36.18 per cent for Greens candidate Angelica Di Camillo.
Political pundits will be scouring the results for clues about Labor's electoral fortunes at state and federal levels, with a federal election due to be held by May.
The two Victorian polls in Werribee in Melbourne's west and Prahran in the city's inner east marked the first time Premier Jacinta Allan and new Opposition Leader Brad Battin have been put to the test at the ballot box.
Labor traditionally holds Werribee but the party's primary vote was down 16.7 per cent.
The resignation of former treasurer Tim Pallas triggered the by-election.
Early on Sunday morning, Liberal candidate Steve Murphy had 29.04 per cent of the primary vote, with Labor's John Lister on 28.71 per cent.
Mr Murphy (49.45 per cent) was trailing Mr Lister (50.55) on a two-candidate-preferred basis.
Finance Minister Katy Gallagher said while politicians watched state by-elections, it "did not change anything" for federal Labor.
"Our plans will remain cost-of-living, providing help where we can, getting on with doing the things we need to do in Medicare and infrastructure and working with state and territory governments," she told ABC Insiders on Sunday.
"We'll continue to sell that message and invest in those services."
The Liberals had hoped to secure an upset win in Werribee and also bag Prahran, a Greens stronghold up for grabs after MP Sam Hibbins quit in disgrace following revelations he had an affair with a staffer.
Early on Sunday morning, Liberal Rachel Westaway (51.6 per cent) was ahead of Ms Di Camillo (48.4 per cent) on a two-candidate-preferred basis.
Labor did not run in Prahran.
Cost-of-living emerged as the main concern for voters, along with housing attainability.
The Victorian Liberals also campaigned heavily on crime, with high-profile murders and knife attacks in Prahran and Werribee attracting attention in recent months.
Ms Allan touted her government's cost-of-living support measures and highlighted divisions in the opposition after a December leadership spill.
Some 104,000 people were enrolled in the two electorates, with 28 per cent of Prahran voters and 29 per cent of those in Werribee casting ballots early or by post.
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