The woman, appearing at a royal commission under the pseudonym ACK, is not Jewish but has close connections to the community.
She relayed hearing a student say words to the effect of: "Hitler didn't have anything against Jewish people. He just didn't want them to suffer."
"No other individual in the room other than myself found that comment inappropriate, offensive or distressing," she told the inquiry on Tuesday.
She was not given further work at the institution.
The royal commission has heard evidence focused on distinguishing anti-Semitism from legitimate criticism of Israel and its actions in Palestine, which witnesses said was a complex endeavour.
The University of Melbourne has confirmed it will appear at the inquiry on Wednesday, with other institutions also expected to give evidence.
Pro-Palestine Jewish academic Dennis Altman said many claims of anti-Semitism diminished the right to protest and overlooked the actions of the Israeli government.
"I think there are many things that people say that might cause hurt, but I'm not sure that in a liberal democracy we ought to be banning things because somebody might be hurt," the LaTrobe University professor said on Tuesday.
Banning the common pro-Palestinian protest refrain "from the river to the sea" ignored the reality that senior members of the Israeli government believed Israel should control the entire territory the saying referred to, Professor Altman said.
"I understand that there are different interpretations of that phrase," he said.
"I don't think I have ever heard any suggestion that people who use that phrase mean by it that Jewish Israelis should be expelled or should not have full rights as in that country."
The full saying "from the river to the sea, Palestine will be free" is a reference to the land between the Jordan River, which borders eastern Israel, and the Mediterranean Sea to the west.
Hamas, designated a terror organisation in Australia, includes similar wording to the slogan in its constitution as part of its rejection of Israel.
The expression and the slogan "globalise the intifada" have been banned in Queensland.
Prof Altman said a bigger concern for him, as a Jew, was the rise of neo-Nazis.
"A lot of the things that people have pointed to as somehow causing offence and hurt seem to me trivial," he said of anti-Semitism claims.
His testimony formed part of broader debate before the royal commission about the intersection between anti-Semitism and legitimate criticism of Israel.
Melbourne University physics professor Steven Prawer said his office was taken over by more than 20 protesters in October 2024, some of whom were wearing keffiyehs and covering their faces with masks.
"One might say that it's legitimate for people to protest at the seat of power," he said.
"In my case, they were protesting against someone who I think was a soft target."
Prof Prawer, who helped introduce quantum computing to the university, is the lead academic of a joint PhD program with the Hebrew University of Jerusalem.
He said it was common to have joint academic programs with overseas institutions and he had not been involved in any further activity with the Israeli university.
The incident came only one year after the "atrocities" of Hamas's October 7, 2023 attack on Israel, Prof Prawer added, which left him "very perturbed".
"I had no idea at that stage if it was a protest, if it was a terrorist attack," he said.Â
Security cameras had since been installed at Prof Prawer's house and his office was only accessible with a swipe pass.
Two students were recommended to the university for expulsion over the incident and two were recommended to be suspended.
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