The Metropolitan Fire Brigade has sent 11 fire trucks and about 50 fire fighters to the blaze at Assembly Drive, Tullamarine, which began just before 8am (AEDT).
A Metropolitan Ambulance Service spokesman said it had treated two people for minor breathing problems near the factory. They did not need hospital treatment, he said.
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MFB spokesman John Rees said the blaze was inside a building that housed several different factories and it was being treated as major.
He said firefighters were still trying to identify what was manufactured at the complex.
"Smoke plumes can be seen from quite some distance and we're telling people if they are in the Assembly Drive, Tullamarine, area stay indoors, close any windows or doors and don't use your air conditioning," Mr Rees said.
