The Country Fire Authority (CFA) issued a warning for residents in the Winton North and Lake Mokoan area, near Benalla, at about 4.30pm (AEDT).
A CFA spokesman said the 20-hectare fire was considered large and was travelling in a southeasterly direction.
She urged residents to move to a safer place if possible.
The organisation's website describes the blaze as "out of control".
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"This fire is expected to affect the towns of Winton North in the vicinity of Gould Road, Ashmead Road and Keenan Road," the website says.
Tourists are urged to stay away from the area.
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