Police are digging up the grounds of a former Ballarat orphanage, in a search for the remains of children.
Police began the search on Monday at 200 Victoria Street, which was once home to the Ballarat Orphanage, the Ballarat Children's Homes and finally Damascus College.
The site was sold to developers in 2011, who applied to have it rezoned for commercial and mixed use.
Ballarat mayor John Phillips confirmed that the allegations had been raised at a council meeting in 2013, when the council were considering plans to redevelop the site.
He did not confirm that the council then referred the claims to the coroner and the Government.
The site is under police guard.
"The investigation relates to alleged activities that may have occurred whilst the orphanage was operational, prior to its closure in 1968," Victoria Police said in a statement.
Detectives are working closely with the coroner and forensic scientists and the Government, police said.