An iconic Melbourne precinct has reduced its waste by 90 per cent by tapping into a whole new industry - recycling food waste.

Two-and-a-half tonnes of food scraps from 90 businesses in the Degraves Street area are dehydrated and turned into fertiliser each week, which is then spread on parks and gardens throughout the city.

"The reason we're doing this is obviously to clean our laneways up, but the bigger picture is 250,000 tonnes of organic waste every year goes into landfill - that's enough to fill Eureka Tower to the top," said councillor Arron Wood from the City of Melbourne.

The recycling program costs the City of Melbourne $300,000 annually and provides employment for seven workers.

"What we've seen immediately is a clean-up of the laneways, so that's an amenity issue," said councillor Wood.

"We've also had a 40 per cent reduction in CO2 emissions."

Australia produces 25 million tonnes of rubbish each year

A machine owned by sustainability company Eco Guardians is located on Degraves Street and works by shredding and heating the waste, stripping out any moisture content.

The 90 businesses in the area can access the machine for free, and staff dump their rubbish at the recycling site just metres away.

"The soil food coming out has been processed from the raw food waste over about a 10 hour period," said David Berry, director at Eco Guardians.

Degraves Street is home to 90 businesses curbing their food waste. ( ABC News: Margaret Burin )

"Because of the temperature we process it at, and the time period, it's perfectly sterile - it's pathogen free - but it retains nutrients."

The technology was developed in South Korea where food waste was banned from going into landfill 20 years ago.

As a small country, South Korea utilises its space for agriculture, avoiding landfills on arable land.

Australia produces around 25 million tonnes of rubbish every year and about 13 million tonnes is organic waste.

Food waste recycling targeting high-rise apartments

While recycling paper, plastics and green-waste has been entrenched in Australian society, food waste recycling is still a new industry.

Eco Guardians has so far supplied 30 machines to hospitals, prisons, markets and mine sites where large amounts of scraps go to landfill.

Their next big target are households in inner-city, high-density apartments.

"In apartment living, composting is not always great because there's a little bit of odour associated with it," said Mr Berry.

"They're looking for an inbuilt solution that all the residents could be able to utilise."

Melbourne restaurateur Sharif Hasan said the recycling program is a good start, but business could be doing more food recycling.

"It's much better; you can walk past and there's no smell, it's clean, you're actually willing to go there and spend time having your coffee, so more people coming in, more tourists coming in, and it's much cleaner," said Mr Hasan.