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Staff and visitors were evacuated from the Metropolitan Remand Centre in Ravenhall after clashes involving hundreds of inmates began at midday.
Parts of the prison are in lockdown but the outer perimeter was not breached.
Victorian Corrections Commissioner Jan Shuard said it was one of Melbourne's biggest ever prison riots.
She said it might be linked to the smoking ban, due to come into effect on Wednesday, but the ban would go ahead regardless.
"Until I get a full debrief, I can't speculate about how it all came about," she told reporters.
But she said it was "very disappointing that it occurred today".
Other media reports quoted people in contact with prisoners who blamed the ban for the violence.
One man, David, told Melbourne's 3AW radio station an inmate had told him earlier in the week that "all hell was going to break loose" if their tobacco was removed
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