The new structure is called the MPavilion. When it's closed it resembles a square grey metal box, but the walls lift open and the roof panels rise to reveal a venue that will host events over the summer months.
The opening was serenaded by the Dhungala Children's Choir, performing a song composed for the event by Indigenous soprano and director of the Short Black Opera Company Deborah Cheetham.
She says her song was written to reflect the connection of the site's heritage to its contemporary use.
"For the Boonwurrung people, the Woiwurrung people, the Kulin nations in general, this space that we celebrate today has been a space where knowledge has been transferred, culture has been lived and this is for something like 70,000 years and MPavilion is a continuation of that."
The temporary structure will host art events in the Queen Victoria Gardens for four months, then it will be moved to a new location, while a new one is built in its place.
It's inspired by a similar project at London's Serpentine Pavilion in Hyde Park, but its architect Sean Godsell says Melbourne's version has a distinctly Australian twist.
"I thought it would be nice to bring a bit of the outback into the city and bring a shed, so it's a sophisticated shed but it's a shed. I think the sheds on the Australian landscape that we see are deeply imbeded in the Australian DNA."
Every year for the next four years a new architect will be commissioned to designed the next temporary pavilion, while the old structure is relocated for use somewhere else in the city.
The Lord Mayor's office says the project cost $1.3 million over four years. But despite the hefty price tag, he says the MPavilion is more than an art installation.
"They are beautiful structures in themselves, they are contributions to art and design but they're also activity hubs where people will come to enjoy themselves to listen to talks to see exhibitions to have meetings and that's the importance of these pavilions."
Controversy over the cost of public art flared earlier this year when Sydney unveiled plans for the $3.5 million Cloud Arch.
The MPavillion is open until February next year.
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