Melbourne is a UNESCO City of Literature, and has often featured in settings for Australian novels of all kinds. Sometimes the city has a brief appearance, and at other times it’s integral to the story. Discover my city through literature!
The Murray Whelan crime novels, by Shane Maloney starting with Stiff, (1994) are unmistakably Melbourne. They couldn’t be set anywhere else. Likewise, many of the crime novels of Peter Temple, including his prize-winning The Broken Shore. 
There are dastardly doings in Australia’s first international blockbuster crime novel, The Mystery of the Hansom Cab (1886) by Fergus Hume, set in Melbourne when it was Marvellous Melbourne, the wealthiest city in Australia thanks to the discovery of gold. (It was gold that built the beautiful State Library of Victoria, featured in the pictures on this page). BTW, do not get the wrong impression from these books about crime: the crime rate in Melbourne has gone down year after year and it’s a safe city, as cities go. (1)
Helen mopes around in Coburg in The Spare Room (2008) by Helen Garner. (See my review ). Christos Tsiolkas shows a Melbourne I do not recognise and certainly don’t want to know, in the now notorious The Slap (see my review). Some of his other books are set in Melbourne too, I am told.
From earlier in the century comes 
The Fortunes of Richard Mahoney trilogy starting with Australia Felix (1917) by Henry Handel Richardson. (Ok, this is mostly set in Ballarat, but Polly comes from Melbourne, and HHR was born in East Melbourne).
Dick Marston and his brother Jim from Robbery Under Arms by Rolf Boldrewood (1888) (see my review) have a fling in Melbourne with their ill-gotten gains, before they head back home to see mum, and are captured for cattle duffing. (You can read this one online at Project Gutenberg).
Steven Carroll’s trilogy, including the Miles Franklin winning The Time We Have Taken (2007), is set somewhere like Glenroy. (It could be any of our 1950s middle ring suburbs, really). My favourite of the three is The Art of the Engine Driver.
Joan London’s The Good Parents (see my review) shows the wicked influence of the bright lights of Melbourne. Maya (the missing daughter) is that missing daughter we so often hear about in the media, a good and innocent girl who ‘would never do anything untoward’. Her parents, Jacob and Toni come to Melbourne to look for her, and don’t. Instead, they move in with Celine, Maya’s flatmate; they go out into Carlton to see the sights.
Eliot Perlman sets his novels in Melbourne too. Three Dollars was his prize-winning first. It won a poll for the most popular book set in Melbourne and it’s a terrific story. See Reading Matters for a review, and then check out Seven Types of Ambiguity – a more complex novel that shows off the inner city haunts we all love so well (even when we now live in the suburbs.)
My Brother Jack by George Johnson is the quintessential Australian novel – it’s the one I recommend to overseas readers as the one they should read if they only have time to read one. It captures our national obsession about the Anzacs, it shows our two biggest cities: Melbourne in the interwar years and Sydney in World War 2, it features laconic Aussie humour and a lovable larrikin, and it explores the psychological conflict between the ‘life of the mind’ and the life of the typical Aussie bloke. BTW The Wikipedia summary is a travesty of the book and needs to be fixed!
Ada Cambridge was a noted Melbourne writer in her day, and now there is the Ada Cambridge Prize (for short stories) which is awarded at the Williamstown Literary Festival each year.
To really know our city, I also recommend a couple of entertaining histories: Bearbrass: Imagining Early Melbourne by Robyn Annear, and Jeff and Jill Sparrow’s Radical Melbourne: A Secret History (see my review). Tuck a copy in your tote, browse it over a macchiato (as only Melbourne’s cafés can make them!) and stroll through the city with a new view of its fascinating past.
Thanks to Sarah, Kim, and Sue for their suggestions. (See comments below). More are welcome!
Update 23.8.09
Andrea Goldsmith’s new novel Reunion is set in Melbourne. The Monthly described it as a ‘kind of inner-city intellectual counterpart to Christos Tsiolkas’s suburban masterpiece The Slap…a novel about how we live now, about the lifestyles and values of present-day Melbourne and, by extension, Australia’. Update 1 Sep 2011, see my review.
Update 21/7/15
Alec Patric’s novel Black Rock White City is set in – yes, you guessed it our seaside suburb of Black Rock. (see my review), and Jane Rawson’s A Wrong Turn at the Office of Unmade Lists is a vision of Melbourne in the wake of climate change that we might not like (see my review).
These three are not novels, but they’re very Melbourne: Solly’s Girl by Ros Collins is a memoir that brings alive Melbourne in the 1950’s (see my review) and Mannix, a biography by Brenda Niall will show you Catholic Melbourne as you cannot imagine it today. (see my review). And if you want to know the extraordinary story of our Yarra River, Yarra, a Diverting History by Kristin Otto is a must read. (And essential for anyone writing historical fiction set in our city). See my review.
(1) New police figures show crime rates in Victoria are at their lowest level since 1993. The statistics show the overall crime rate has dropped across the state for the seventh year running. It has fallen 24.5 per cent since 2000-2001.(Source: http://www.abc.net.au/news/stories/2008/08/18/2338210.htm?site=melbourne)
ANZ LitLovers LitBlog 
I should be going to bed but…I think Perlman’s books are set in Melbourne but I can’t recollect where, and then of course there are Christos Tsiolkas’ books. I’ll let you, being the Melbournian, do the scouring. Also, didn’t some of those early Aussie writers like Ada Cambridge write there too?
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By: whisperinggums on August 18, 2009
at 12:03 am
Of course, how could I have forgotten Perlman? Three Dollars was such a compelling read, and Seven Types of Ambiguity showed what a clever writer he is. He’s been quiet for a while, I hope that nasty and grossly unfair review by Peter Craven didn’t put him off writing! I don’t know about Ada Cambridge, will see what I can find out. Yes, will add The Slap *sigh*
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By: Lisa Hill on August 18, 2009
at 9:08 am
Eliot Pearlman’s two novels, Seven Types of Ambiguity, and Three Dollars, are both set in Melbourne — and both reviewed on my blog somewhere.
George Johnston’s My Brother Jack.
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By: kimbofo on August 18, 2009
at 5:10 am
Likewise, how could I have forgotten My Brother Jack? The hospital where Jack’s mother works looking after the returned soldiers, is now Caulfield Hospital – where they cared for my dear old music teacher each time she had an ‘event’. I was a regular visitor there, alternating between getting her in, and then trying to get her out, and she had her 91st birthday there. Thanks, Kim, and will put links to your reviews…
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By: Lisa Hill on August 18, 2009
at 9:13 am
Most of Peter Temple’s novels are set at least partially in Melbourne, as is Joan London’s The Good Parents.
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By: adevotedreader on August 18, 2009
at 7:11 am
Hi Sarah! The only Temple I’ve ever read was The Broken Shore, the one that won a prize overseas. I didn’t record anything about where it was set in my reading journal when I read it in 2007. Do you know if that one is set in Melbourne? I should have remembered The Good Parents because I only read it a little while ago – fantastic book, I loved it! Lisa
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By: Lisa Hill on August 18, 2009
at 9:19 am
LOL Lisa, you’ll soon be overwhelmed! I’d forgotten the Joan London, devotedreader, as I can’t get her “Western Australianness” out of my head! Ada Cambridge – check her out on Wikipedia. I didn’t create the article but did a lot of work on it a couple of years ago. I think you’ll find her interesting in terms of Melbourne and Victoria.
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By: whisperinggums on August 18, 2009
at 9:19 am
Sarah will remember I’m sure … most of it – The Broken Shore – was in the country but he does start in Melbourne and go back there at least once during the book I think…BUT not being very familiar with Melbourne I can’t go more than that!
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By: whisperinggums on August 18, 2009
at 9:38 am
I have an award for you at http://readersrandomramblings.blogspot.com/2009/08/attack-of-zombie-chickens.html
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By: Fiona on August 20, 2009
at 4:53 pm
Great selection of books! I was looking for a book to send to friends overseas and you have given me lots of ideas. Thanks!
I was surprised to read that you don’t recognise the Melbourne of Christos Tsiolkas in The Slap, though. I have lived in Melbourne for 20 years now and at one stage or another I have met all the people he writes about. It’s not a pretty side of Melbourne and one I could do without but it is very real!
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By: Barbara on August 3, 2010
at 9:39 pm
Hello Barbara – how nice to meet another booklover from Melbourne!
I think there are probably many more books featuring Melbourne, but I wrote the post in haste and have never had time to revisit it.
*chuckle* Maybe it’s because I teach in a school, where we are still valiantly trying to banish bad language, drugs and a-hem, ‘inappropriate behaviour’ that Mr T’s world is so strange and alien to me?
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By: Lisa Hill on August 3, 2010
at 10:43 pm
For reader interest, especially readers who enjoy historical novels – In Lonnie’s Shadow is set in Little Lon, 1891.
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By: chrissie michaels on July 7, 2011
at 6:28 pm
Hello Chrissie, I hadn’t heard of this one so I looked it up on Fishpond – where they’ve classified it for age range 10-14. Is that appropriate, or is it more of a YA novel? This is the link
In Lonnie’s Shadow
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By: Lisa Hill on July 7, 2011
at 6:36 pm
Hi Lisa,
It is for 15 plus readers, definitely YA! If you’d like some background, more info can be found at:
http://sites.google.com/site/chrissiemichaelsorg
Best, Chrissie
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By: chrissie michaels on July 8, 2011
at 8:41 pm
Thanks Chrissie, congratulations on all the listings for this book:)
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By: Lisa Hill on July 8, 2011
at 9:36 pm
Let me know if you enjoy it!
Chrissie
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By: chrissie michaels on July 9, 2011
at 4:19 pm