Developers of the Palace Theatre site have been labelled "completely pathetic" after workers began stripping century-old interiors from the building at the same time protection for the former music venue was being investigated.

Reports of jack-hammering sounds at the Bourke Street address were on Thursday followed by the discovery of a skip in a rear lane containing pieces of plasterwork and tiles from the 1912 Edwardian theatre.

The interior of the Palace Theatre, for which the Melbourne City Council was considering seeking heritage protection. Credit:Joe Armao

Fairfax Media understands some of the items in the skip were part of features that Melbourne City Council staff were proposing to list for heritage protection.

Late on Thursday afternoon the council announced they would seek emergency interim heritage protection for the interior of the building. Planning enforcement and building surveying offices are investigating the removal of the interior material.