A man has been arrested and interviewed by police over a dangerous grass fire that threatened several towns north of Melbourne.

The blaze was still burning on Wednesday afternoon, but had been brought under control.

The 71-year-old local man has been released, pending further inquiries, but the investigation into the cause of the fire continues.

It started at Flowerdale, about 90 minutes north-east of Melbourne, on Tuesday afternoon and had grown to more than 700 hectares by Wednesday.

An emergency warning was initially issued for Flowerdale residents, although it was downgraded to a watch and act message on Wednesday morning.

People in Flowerdale, Dairy Creek, Homewood, Kerrisdale and Strath Creek were told to monitor conditions and be prepared to act.

More than 50 CFA units and 10 waterbombing aircraft were battling the grassfire across steep, inaccessible terrain.

No homes have been confirmed as lost although one property was superficially damaged in the blaze.

Some fencing and sheds may also have been affected by the flames.

No homes had been lost but one property was partially damaged in the blaze, Emergency Management Commissioner Andrew Crisp said.

“We are literally throwing everything at this particular fire but there’s still a lot of work to be done,” he told reporters on Wednesday.

Smoke is visible across the area and an incident control centre has been set up at Alexandra. A relief centre opened at the Yea Recreation reserve on Wednesday afternoon.

A community meeting will be held at the reserve later on Wednesday.

Mr Crisp said Flowerdale residents might be feeling on edge as the town was one of those devastated by the Black Saturday fires.

Some 173 people lost their lives in the 2009 bushfires, which tore through more than 450,000 hectares of land.

“I’m sure people in the Flowerdale area are triggered, a number of them, by what they’re seeing, what they’re hearing, what they’re smelling at the moment,” Mr Crisp said.

“However, we’ve also received feedback from local residents about how great it is to see everything working so well.”

Crews hope to contain the blaze before Friday, when temperatures will nudge 40 degrees and winds will pick up ahead of a Saturday cool change.

“The next couple of days will be challenging for firefighters,” CFA chief officer Jason Heffernan said.

Mr Crisp said the days ahead would be dangerous for Victoria.

“There is a chance that on Friday we could see a total fire ban up in the Wimmera and there could be elevated [risk] in relation to predominantly the north-west of the state,” he said on Wednesday.

“Yesterday morning, people at Flowerdale would not have expected a fire literally at their back door … Nobody can afford to be complacent anywhere in the state over the next few days.”

Mr Heffernan said the Victorian fire season could continue for some weeks, after floods in spring led to excess vegetation.

“I do expect March to still be reasonably warm and dry, so communities can’t be complacent,” he said.

“That fuel is out there and we need to make sure that you’ve got your bushfire survival plan.”

Victorians have also been reminded to extinguish campfires when they leave an area, especially as the temperatures rise.

“Over 10 per cent of bushfires are caused by unattended campfires,” Forest Fire Management chief Chris Hardman said.

“If it’s not cool to touch with your hand, it’s not cool to leave.”

-with AAP