Authorities told residents and tourists to leave immediately as floodwaters rose to dangerous levels.
Multiple flood and thunderstorm warnings were in place across Victoria with the deluge filling streets with water.
Authorities rescued 38 people from flooding and almost 1,000 calls were made for help, Victoria State emergency services said.
More than 7 inches of rainfall was expected to fall in the north-east of Victoria.
Authorities warned flooding that would reach above the floor level of single-story houses was likely, and access to key roads would be difficult.
The area is popular with holidaymakers.
Victoria emergency management commissioner Rick Nugent said: "If you live in a flood-prone area, please make the necessary plans. Especially people living in caravan parks and camping along creeks and other waterways.
"Falling tree branches and flash floods are the highest risk. Please don't drive through flood waters."
There have also been reports of contamination in the local water supply system in the south-east of Victoria. Authorities warn that drinking un-boiled tap water could lead to stomach problems.
Melbourne has been spared the worst of the weather but has received a large amount of rainfall.
The states of South Australia and New South Wales are also bracing for storms as the country's populous east coast continues to be hit by bad weather.
