A council worker emptying the bin on Saturday morning made the grisly discovery but it is unclear whether the bin and the body could have been dumped on Butler Street days ago.

A neighbour, who did not wish to be identified, said she had seen the recycling bin on the nature strip on Thursday morning.

"When I opened the lid, it was full up," she said. "I thought it was rubbish or something but the bin had a big, black bag."

The garbage bag was not tied up properly and she could see what looked like a dark cloth hanging from it.

While the bin did smell, she said "it was mixed up".

"I never thought there was a body there," she said.

It was a concerned Preston resident who requested Darebin City Council pick up the bin, left out days after the local weekly garbage collection.

The garbage truck driver sent to collect it saw the body on the truck's cameras as he emptied it shortly after 8am on Saturday.

Police has confirmed the bin was abandoned in the street but did not say what council it belonged to, or how long it was there.

"The bin is not from the immediate area from where the pick-up was made," Victoria Police Detective Sergeant Mark Butterworth said.

He would not comment on the state of the body on Saturday but said a post-mortem examination would be carried out.

The body, partly clothed in a white, blood-soaked shirt, was wrapped in tarpaulin before it was removed from the scene.

Horrified neighbours said they had not noticed anything unusual in the area in the lead-up to the body's discovery.

Sergeant Butterworth said the garbage truck driver was "quite distressed".

Darebin City Council spokeswoman Tiffany White was unable to comment on the state of the garbage collector on Sunday but said it was standard council protocol to support the wellbeing of staff, especially in traumatic circumstances.