More workers are able to return to offices and mask restrictions are to relax within days, the state government says.
Premier Daniel Andrews announced from Monday private sector businesses can have 50 per cent of staff working from offices and the public sector can have 25 per cent.
"We have kept the public sector back a bit to enable greater capacity in the private sector," Mr Andrews said.
Mask-wearing requirements will also reduce from all indoor settings to just "higher-risk settings" like shopping centres, supermarkets, hospitals and public transport, returning to what requirements were before Christmas.
"We know masks have been a very important insurance policy," Mr Andrews said.
He said the announcement to return to offices gave employers "some notice" while acknowledging the state's health officials made the decision on Thursday morning.
Mr Andrews said after nearly 12 months of working from home there was a "balance point to be struck" for some who had found the flexibility beneficial.
"My request to all employers and all employees is to sit down and have a good faith discussion about what works best for the business and for the worker," he said.
"Many people will, I think, want to work a day or two at home because it works for them.
"It also works for the business, their productivity on many levels is actually higher. Together with some other benefits for the road network, public transport and of course COVID-safety."
It came as the state recorded its eighth day of no locally acquired coronavirus cases. There are 29 active cases of coronavirus in Victoria.
"To get to this eight days in a row of zero is no small thing, it's a credit to our public health team and all Victorians who have played their part in doing so," Mr Andrews said.
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