A PERMANENT ban on fracking and all related exploration and development of unconventional gas will be introduced across Victoria.
The state government said it will introduce the ban later this year, to protect the state's valuable farming sector.
"Our farmers produce some of the world's cleanest and freshest food. We won't put that at risk with fracking," Premier Daniel Andrews said.
"Victorians have made it clear that they don't support fracking and that the health and environmental risks involved outweigh any potential benefits."
A state parliamentary inquiry last year into the issue received more than 1600 submissions, mostly in opposition to fracking.
"There has been a great deal of community concern and anxiety about onshore unconventional gas – this decision gets the balance right," Minister for Resources Wade Noonan said.
"We have carefully considered the Parliamentary Inquiry's key findings and recommendations, consulted widely and made our decision on the best available evidence."
Fracking, the extraction of natural gas from coal seams, has proved controversial in Australia.
Australia has large reserves of coal seam gas, especially in Queensland, New South Wales and Victoria, while large shale gas deposits exist across the Northern Territory, South Australia and Western Australia.
Coal seam gas is currently being extracted from mines in Queensland and New South Wales, where there are also several exploration wells in the Liverpool Plains and Hunter Valley.
Opposition to fracking has united farming and green groups, especially over concerns that seepage from coal seam gas mines could contaminate water supply.
In the US, federal seismologists have blamed widespread fracking in Oklahoma for an increase in earth tremors across the state.
Liberal party elder Peter Reith, who wrote a report for the previous Coalition state government in favour of fracking, lashed out at Victorian Nationals last year, saying they were "in bed with the Greens" to maintain the state's moratorium on coal seam gas.
The moratorium on fracking will be extended until June 30, 2020.
Exemptions to the ban include gas storage and carbon storage research.
Offshore gas exploration and development will also continue.