Family and friends have gathered around Australian acting legend Bill Hunter, who is gravely ill in a Melbourne hospice.

Hunter's manager Mark Morrissey confirmed this morning that his 71-year-old client's health had deteriorated since he was admitted to the Kew hospice two days ago.

"Sadly, he has cancer, and it's inoperable," he said.

Hunter appeared in more than 60 films, including a role in The Shiralee in 1957.