Metro Trains is set to switch Sky News off in the wake of the Blair Cottrell interview.
Victoria's rail provider has been ordered to dump Sky News from its stations amid backlash over the news channel's interview with far-right extremist Blair Cottrell.
The interview with the former leader of the anti-immigration group United Patriots Front had been roundly slammed, with even Sky News contributors and staffers condemning the interview.
"Hatred and racism have no place on our screens or in our community," Ms Allan said on Twitter.
"That interview was unacceptable, indeed Sky News themselves have admitted they got it wrong," Ms Allan told Melbourne radio station 3AW on Thursday.
"I think I've got a responsibility as the public transport minister to ensure that passengers aren't bombarded with what's really shocking content and messages."
Metro Trains would not be the first organisation to sever ties with the news channel over the interview, with American Express, Huggies and Specsavers already pulling their advertising.
Former Labor frontbencher Craig Emerson also quit his regular commentary spot on Sky News over the decision to interview Mr Cottrell, who he labelled a "neo-Nazi".
"My father fought Nazis in WWII and was interred in a German POW camp," Mr Emerson posted on Twitter.
"The decision to allow Neo-Nazi Blair Cotterell onto the channel was another step in a journey to normalising racism & bigotry in our country."
Sky News had already deleted the footage from its website and all social media channels, event conceding the interview was "wrong".
Mr Cottrell, who once suggested a picture of Adolf Hitler should be hung in every Australian classroom, attacked Sky's "pathetic" back down and accused the station of "caving in" to "Leftist abuse".
He was invited onto the Adam Giles show to talk about winding back immigration.
Mr Cottrell was convicted in 2017 of inciting contempt and ridicule of Muslims. He also has convictions for other matters, including arson.
He is due to appear in the High Court later this year to fight the 2017 conviction and has sought public help to finance his case.
"It was wrong to have Blair Cottrell on Sky News Australia," news director Greg Byrnes tweeted after the program aired on Sunday night.
"His views do not reflect ours. The interview has been removed from repeat timeslots and online platforms."
But conservative columnist and Sky News presenter Andrew Bolt has attacked the rail ban.
“This is the Victorian government trying to shut down Sky News for having some conservative presenters,” Bolt told Sky News
“That’s the real aim of this boycott… I think this is a very serious moment in Australian journalism.”
Metro Trains has been contacted for comment.