Revellers had the choice of four official events to choose from, including the annual parade from Swanston Street to St Kilda Road.

Australia Day Victoria Committee chair Stefan Romaniw said about 12,000 people watched the parade and about 7000 watched the flag-raising ceremony at the Melbourne Town Hall.

"It was a very colourful and exciting parade,' Mr Romaniw said.

"It showed our uniqueness and diversity."

He said about 90,000 people came to the picnic and Federation vehicle display at Kings Domain Gardens, and 25,000 were expected to watch the two tonnes of fireworks display at Docklands on Tuesday night.

Mark Doughney, who is currently living rough on Swanston Street, also joined in, hoisting the national flag on his possessions.

"It is a celebration of the country," Mr Doughney said.

At Aussie Map Souvenirs, Australia Day paraphernalia was in hot demand. Manager Nat Assavatheptavee said many of her customers were tourists.

"There is a lot more business than last year," Ms Assavatheptavee said.

"The most popular proved to be the Australian headband. The kids love the inflatable toys – the inflatable hand [in Australian flag colours], and the kangaroo."

Thai students Billy Sutthajit and Pang Nuuvathai said they had started the day watching the parade and were planning to have a picnic in the botanical gardens.

It was Bella McDonald's first Australia Day. The nine-month-old was out with dad Matt McDonald, mum Kara Pattison, and sister two-year-old Ava McDonald.

"We are just enjoying dad being home for the day, just being with the family," Ms Pattison said.

"We are just enjoying our city."

Edinburgh Gardens, which has been the scene of mayhem in the past, saw crowds of "more than 3000 people" gather to mark the day.

City of Yarra mayor Roberto Colanzi thanked everyone who contributed to the safe and respectful use of the "magnificent" park.

City of Port Phillip mayor Bernadene Voss said an estimated crowd of 50,000 people gathered at the St Kilda foreshore and remained "very well behaved" throughout the day.

It was a different kind of celebration at Treasury Gardens which was hosting its 14th Share the Spirit festival to mark "Survival Day" of Australia's Indigenous community.

Families with babies in prams, elderly couples, youngsters wearing Aboriginal flag T-shirts, as well as tourists sat on picnic blankets and listened to 50 artists perform.

Share the Spirit committee member Kevin Garant said they had more than 5000 people at the event.

"It is definitely an increase from last year," Mr Garant said.

"It's really opened up.

"I find it really interesting that different cultures find this is a great way to spend Australia Day."

Earlier hundreds of people had rallied at Spring Street to protest against Australia Day celebrations.

Palawa woman Jody Beeton, who had been at the rally, said it was "absolutely sick" to celebrate Australia Day.

"We are just celebrating death and genocide," Ms Beeton said.

She said Australia Day was about the survival of the Indigenous community.

"We are still here, they have stolen generations, massacred right through this land, [our] sacred sites have been taken away," Ms Beeton said.

"We survived in extraordinary conditions."