An arson attack at a synagogue has forced worshippers to flee, just as protesters descended on an Israeli restaurant nearby shouting "offensive chants".
About 20 people at the synagogue fled after a man doused the front of the East Melbourne building in a flammable liquid and set it alight about 8pm on Friday, police said.
Everyone inside was able to evacuate through a rear exit and there are no reports of injuries.
Firefighters contained blaze to the front of the building.
"Police are still working to establish the exact circumstances surrounding the fire including the motivation behind the incident," a Victoria Police spokesperson said.
"There is absolutely no place in our society for anti-Semitic or hate-based behaviour."
The East Melbourne Synagogue, on of Australia's oldest, is located close to Victoria's parliament in the heart of the city. The suspect was last seen fleeing down Albert Street towards the CBD.
A short time later, protesters gathered outside Israeli restaurant Miznon on Hardware Lane in the heart of the city.
Police say about 20 demonstrators shouted "offensive chants" and were directed to leave the area.
Anti-Defamation Commission chair Dvir Abramovich said diners were terrorised as the group chanted "Death to the IDF".
"Melbourne, for one night, stopped being a safe place for Jews," Dr Abramovich said.
One person was arrested for hindering police and several others were spoken to by investigators.
The force said it supports the right of Victorians to protest peacefully but would not tolerate "anti-social and violent behaviour" witnessed.
It comes seven months after a devastating fire at the Adass Israel Synagogue at Ripponlea in the city's south.
Two of the synagogue's three buildings were destroyed in the early-morning blaze, which also forced members of the congregation to flee.
No charges have been laid however counter-terrorism police have raided multiple properties as part of that investigation.
The latest incidents also follow disagreement between Australia's special envoy to combat anti-Semitism and NSW MPs, over a call to ban pro-Palestine protests from city centres.
Jillian Segal gave evidence to a parliamentary inquiry examining anti-Semitism in Sydney on Friday and was pressed on previous statements where she labelled the weekly demonstrations as "intimidatory" and "sinister".
Labor MP Stephen Lawrence suggested her comments were an "uncivil way to describe them and the people participating".