The Age reports that up to 40 firefighters are battling the huge blaze.
The alarm was raised shortly after 6am and the fire has taken hold in the roof area of St Joseph's Catholic church, on Otter Street, Collingwood, a Melbourne Fire Brigade spokesman said.
St Joseph's church dates back to the 1850s when the first foundations were laid, parish priest Tim Costelloe told The Age/AAP today.
Fr Costelloe said the parish community had suffered a massive loss and the first priority was to provide support for church members.
"This is a fairly tight-knit church community, and as you'd understand many of our parishioners are quite shocked by the fire," he said.
According to a fire fighter spokesman, the flames were as high as 35 metres at the height of the blaze.
It's not yet known if the fire was started deliberately. Victorian police are appealing for any witnesses in the area between 5.30am and 7am to contact them.
Huge blaze in Melbourne church (The Age, 2/4/07)
Church fire leaves community devastated (The Age/AAP, 2/4/07)
LINKS (not necessarily endorsed by Church Resources)
St Joseph's Parish, Collingwood
2 Apr 2007