It is believed the man was working on a gas pipe or tank at a worksite connected with the back of the hotel when the explosion occurred about 12.30pm on Tuesday.

He was taken by ambulance to The Alfred hospital in a serious condition.

Police and WorkSafe investigators were at the scene on Tuesday afternoon.

The adjoining Albion, which is part-owned by Collingwood star Dane Swan, was the target of an arson attack in October last year.

A man who requested to be known only as Chris was on a worksite a few hundred metres away from the hotel when he heard the "significant" explosion.

At first he thought the sound was another truck hitting the nearby Montague Street bridge, which has become notorious for vehicle collisions.

"I just said to my workmate, 'Here we go again another truck has hit that bridge'," he said.

"It's just a tragedy what's happened to this pub."

The hotel was under renovation and only days away from reopening as a rooftop bar and lounge when it was gutted by a suspicious fire on October 5 last year.

On the morning of that fire, the site's construction foreman arrived to find two men wearing balaclavas inside.

He was bashed by the masked men, before they fled. Seconds later, the building was engulfed in flames.

The damage to the Albion Hotel after the explosion. Photo: Jason South

The venue, on the corner of Northumberland Street and York Street, opposite the South Melbourne Market, was formerly The Motel nightclub.

It is now owned by Dane Swan, Matt Darcy from the Darcy Group, Mark Armstrong, and former Melbourne Storm stars Robbie Kearns and Danny Williams.

It is Swan's first nightclub venture.

Dane Swan promoting The Albion rooftop bar and lounge. Photo: Facebook

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