Premier Daniel Andrews has declared victory for Labor in his third-straight election win as leader, saying "hope always defeats hate".
The win is despite the party suffering some large swings against it, particularly in Melbourne's west and north, in areas once considered its heartland.
By the early hours of Sunday morning, the ABC had projected a Labor win in at least 50 seats, with the Liberals ending up with a net loss.
It means Mr Andrews has led his party to a third consecutive election win, equalling former premier Steve Bracks's record.
Mr Andrews arrived at Labor HQ to jubilant cheers shortly after Opposition Leader Matthew Guy conceded defeat.
The premier told the crowd it had been an "incredibly challenging" few years, where the government had to make "some very tough decisions".
While not mentioning COVID-19 by name, Mr Andrews said the community had stuck together through a one-in-100-year event and was not as divided as some had said.
"Friends, hope always defeats hate," he said.
Mr Andrews returned to some of the key policy platforms of the campaign, declaring his government had put forward a "positive and optimistic plan" including free kinder, free TAFE courses, recruitment of healthcare workers and reinstatement of the State Electricity Commission.
He said his party would govern for all Victorians.
Deputy premier says 'positive agenda' won Labor the election
The party faithful celebrated at Labor's election-night party after news of the victory.
The win came after an at-times bitter election campaign, which saw many analysts predicting a minority government for Labor.
Mr Andrews became one of the nation's most polarising figures during Victoria's long lockdowns.
The Coalition had hoped to pick up votes as a result of the simmering anger over COVID restrictions, a strained health system and a growing debt.
"Democracy has been operated, a decision has been made, and we will as an opposition rebuild," Shadow treasurer David Davis said.
Deputy Premier Jacinta Allan said the electorate had responded to Labor's "positive agenda".
She said the Liberal Party's strategy to focus on Mr Andrews "seems to have backfired".
"The Liberal Party chose to put him on their how-to-vote cards, that seems to have backfired," she said.
Ms Allan said it was a "bitter blow for the Liberal Party" that Labor had held onto seats in Melbourne's east.
The junior Coalition partner, the Nationals, has performed much more strongly in the regions.
Labor went into the election with a majority, holding 56 seats in the state's 88-district lower house, compared to the Coalition's 27 — made up of 21 Liberals and six Nationals. The crossbench consisted of three Greens MPs and two regional independents.
The Greens look set to increase their number of lower-house seats, while regional independent MPs have lost their seats to the Nationals.
