The fire began on Punt Road in South Yarra just before 6.25am and led to homes being evacuated and hundreds of residents being warned to stay inside before it was brought under control about 8am.
About 60 firefighters were on scene, while a Watch and Act message was issued for people living in the nearby areas of Albert Park, Cremorne, Melbourne, Prahran, Richmond, South Melbourne, South Yarra, Windsor.
Firefighters were confronted with “a really big fire” when they arrived on scene, with the back of the church completely alight, according to Fire Rescue Victoria commander Mitch Simons.
“It was a really intense fire,” he said.
“Flames were leaping up into the air quite high.”
He said the rear end of the church had been extensively damaged, while the front section had mostly been saved.
It is believed the fire began in the church and spread to Christ Church Grammar School early learning centre, which has been destroyed by the blaze.
School principal Neil Andary has said the building had only recently been renovated.
The nearby South Yarra Primary School is believed to have been protected from the fire.
Simons said two minor injuries were sustained as the fire was contained, with a firefighter suffering a hand injury from a burst hose and another facing heat stress.
Anyone within one-kilometre radius of the fire, which involves a very built up residential and commercial area, was warned that embers were being emitted from the fire.
The cause of the fire is not yet known.
Punt Road, South Yarra is closed in both directions between Toorak Road and Commercial Road due to a nearby building fire.
Motorists are being advised to use St Kilda Road or Chapel Street instead.
Firefighters are expected to be on the scene all day ensuring the fire does not reignite.
Smoke is expected to remain in the area for several hours.