The plane crashed into the Direct Factory Outlet (DFO) shopping center in Essendon at 0900 a.m. local time, causing a large explosion at the center, Xinhua reported.
Five people were on board the Beechcraft B200 Super King Air plane which departed Essendon Airport for King Island, a popular golf and food tourist destination off the north-west coast of Tasmania, shortly before crashing.
"It appears to be a very, very tragic accident that has occurred out there," Lisa Neville, Victorias police minister, told reporters.
Neville did not confirm any fatalities but News Limited reported it was unlikely there were any survivors.
A total of 13 fire-fighting crews attended the scene to battle the blaze caused by the crash with the nearby Tullamarine freeway closed while the situation was managed.
It is understood that the plane crashed into a warehouse for popular craft sore Spotlight with all staff at the warehouse being accounted for.