Victoria's fire services will be dramatically overhauled with Premier Daniel Andrews splitting volunteer and paid firefighters into two separate authorities.

The move comes with political risk for Mr Andrews, who has already lost much political capital, and a minister, over his intervention in an industrial dispute between the CFA and its paid staff represented by the United Firefighters Union.

The Premier's plan to split the firefighting services in two is a risky political move. Credit:Twitter/@MFBChief

Under the plan, passed by Cabinet on Thursday, the MFB will be replaced with Fire Rescue Victoria, which will cover all paid firefighters, including those at 35 integrated CFA stations across suburban Melbourne and in regional centres.

The CFA will continue to exist and will become a volunteer only service, with its role strengthened under law. The Andrews government is also injecting $100 million to the service.