Australian media reported that the shooter, who is believed to be on the run, apparently fired from a vehicle as it was passing by the Love Machine nightclub, which was hosting a night for "old school groovers".
It's understood a volley of shots was sacked towards the club from a passing vehicle just after 3am, striking four men. A 50-year-old man and a 29-year-old man sustained non-life threatening injuries.
It's understood at least one man, believed to be a security guard, was shot in the face.
The scene outside the Love Machine nightclub in Prahran after the drive-by shooting.
At about 3:10 am on Sunday four people were hit by gunshots outside Love Machine Nightclub in Prahran and transported to Alfred Hospital. Both were hospitalized. It also reported that the suspect was driving a black Porsche Cayenne, stolen before the incident.
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Local detectives are probing the involvement of an outlaw motorcycle gang as the gang had recently made extortion attempts on the nightclub. The footpath on Chapel St has just been closed due to trail of blood up to where one of the victims was found.
Four people were taken to hospital after the shooting, but police believe others may have been injured and fled the area before emergency services arrived.
Anyone with information or footage of the incident could contact Crime Stoppers.
Three of the people shot, including the man who has since died, were employees of the nightclub, police said.
Incidents of mass shootings are rare in Australia.