Victoria recorded 23 coronavirus deaths and 113 new cases in the past 24 hours to Thursday morning, the state's health department announced.
The death toll marks the third deadliest day of the pandemic so far, after 24 deaths were recorded on Wednesday, with Victoria’s death toll now standing 485.
Premier Daniel Andrews said 22 of the 23 deaths are linked to aged care clusters.
Thursday’s case numbers are the lowest since July 6, continuing a promising decline in new infections following the peak of the ‘second wave’ in early August.
"I think that every Victorian can be positive about the fact these numbers are coming down," Mr Andrews said.
"As challenging as this is, the strategy is working."
Active case numbers across the state continue to fall, with 391 cases among health workers and 48 active cases in disability care.
Prime Minister Scott Morrison called the latest deaths "devastating". He said while the numbers were nowhere where they need to be, Victoria had "turned the corner" in battling its second outbreak.
"We will continue to invest our efforts in assisting them to ensure that we can continue to get this outbreak under control and return life in Melbourne and across Victoria, to as normal as you can in a COVID-safe world," Mr Morrison said.
"The restrictions should be in only for as long as they are absolutely needed and they should only be placed in where they are absolutely needed, based on that medical advice."
The figures come as Premier Daniel Andrews is dragged to the negotiating table over a proposed extension to Victoria's state of emergency legislation, allowing the retention of ongoing coronavirus restrictions.
Prime Minister Scott Morrison Source: AAP
He is pushing to extend the legislation for 12 months, but without the support of the state opposition, may have to compromise to satisfy at least four crossbench MPs for it to pass.
Prominent crossbencher Fiona Patten wants the emergency powers extended by no more than six months and a cross-party committee set up to oversee the provisions.
"The 12-month extension just won't pass the parliament, so they're looking for a modified version of that, that would include a maximum of six months before it came back to the parliament," crossbencher Fiona Patten told the ABC.
"They will certainly need to renegotiate that if they're to pass it through the upper house."
The pandemic sparked a state of emergency declaration on March 16. It is due to expire on September 13 after a maximum six extensions.
Mr Andrews stressed the proposed extension did not mean stage four restrictions would be in place for another year and rules would only remain "for so long as it is necessary".
"We can't go from stage four to stage zero and have no rules at all," he said.
Also on Thursday, Victoria Police will ramp up efforts to shut down a daily protest against Melbourne's strict stage-four lockdown.
Four men were arrested on Wednesday night at George Andrews Reserve in Dandenong, while officers also issued 11 fines.
It follows two arrests and 11 fines at the reserve on Monday night, plus 11 fines and one arrest on Tuesday.
"I'm concerned and we will be taking further action," Chief Commissioner Shane Patton told Melbourne radio station 3AW.
"They might not be happy with the lockdown ... no one is."
Metropolitan Melbourne residents are subject to Stage 4 restrictions and must comply with a curfew between the hours of 8pm and 5am. During the curfew, people in Melbourne can only leave their house for work, and essential health, care or safety reasons.
Between 5am and 8pm, people in Melbourne can leave the home for exercise, to shop for necessary goods and services, for work, for health care, or to care for a sick or elderly relative.
All Victorians must wear a face covering when they leave home, no matter where they live.
People in Australia must stay at least 1.5 metres away from others. Check your state’s restrictions on gathering limits.
If you are experiencing cold or flu symptoms, stay home and arrange a test by calling your doctor or contact the Coronavirus Health Information Hotline on 1800 020 080.
