Victorian Premier Daniel Andrews says a government decision to permanently ban fracking is a win for the state's farmers and any suggestion it could cost jobs is "speculative".
The legislative ban, to be introduced into parliament later this year, will prohibit the exploration and development of all onshore unconventional gas in Victoria.
"This is about making a fundamental choice to put farmers and our clean, green brand first," the premier told reporters in South Gippsland on Tuesday.
"This is the first ban of its kind anywhere in our nation.
"It speaks volumes to the dangers, uncertainty and the anxiety within the Victorian community about fracking."
Mr Andrews said any suggestion the ban could cost jobs was "purely speculative" because no viable deposits had been found.
Until the legislation is passed an existing moratorium on onshore unconventional gas - including fracking and coal seam gas - will remain in place.
The government will also extend the current moratorium on onshore conventional gas drilling until mid-2020.
Over the next four years there'll be a scientific study of conventional gas - which doesn't require the fracturing of rock - to examine how much is in the ground and whether it can be extracted safely.
Environmental groups applauded Tuesday's decision which follows a parliamentary inquiry into unconventional gas.
"The decision to ban the destructive unconventional gas industry will be seen as the right move by generations to come," Friends of the Earth spokesman Cam Walker said in a statement.
The Climate Council congratulated Victoria for recognising that switching from one fossil fuel to another wasn't the key to tackling dangerous global warming.
"We hope to see other states and territories following Victoria's lead," Prof Will Steffen said in a statement.
The Australian Workers' Union, however, argues the ban on onshore conventional gas mining until mid-2020 will threaten jobs.
"If new exploration and extraction is not allowed there will be an exodus of investment and jobs from Victoria," AWU Victorian secretary Ben Davis said in a statement.
"The (conventional) reserves are there and we do not need to pursue unconventional sources."
Victorian Greens energy spokesperson Ellen Sandell said it was disappointing that Labor had left the door open to conventional gas drilling down the track.
"We won't stop fighting until all onshore gas drilling is banned," Ms Sandell said in a statement on Tuesday.
"Today's announcement is a big step in that direction - but we won't relax."
The Victorian opposition has previously backed a moratorium until 2020.
The Liberals on Tuesday said "by shutting the door on future exploration of conventional gas Daniel Andrews is condemning Victorians to higher energy costs".
