The Victorian Government has dumped a proposal to build a new youth detention centre in Werribee South after fierce voter backlash.

The $288-million high security youth justice centre will instead be built on land owned by Melbourne Water in Cherry Creek near the Werribee tip in Wyndham.

Children's Minister Jenny Mikakos said the centre would be built within the current budget with a two-kilometre buffer between the jail and about six homes.

Ms Mikakos said she was not embarrassed by the backdown, following a mass rally against Labor's plans in Werribee's main street and warnings Treasurer and Werribee MP Tim Pallas would be punished at next year's state election.

The new site will have a two-kilometre buffer from homes in the area. ( ABC News: Jean Edwards )

"This is a sign of a healthy democratic process, this is a sign of a Government that does in fact respond to community concerns," she said.

"This is a win for this local community."

Ms Mikakos said the 67-hectare Cherry Creek site was not among more than a dozen locations initially considered by the Government because it was not on the surplus land register.

Mr Pallas denied taking his electorate for granted and said he was relieved by the decision.

"I hope this demonstrates that we are not a Government that simply goes head down at a gate with a proposal," he said.

"We've listened to the community and we've adjusted our thinking accordingly."

Fifteen inmates escaped from Malmsbury Youth Justice Centre last month. ( News Video )

The Government unveiled plans to build the jail in Werribee South last month, following repeated riots at Victoria's two youth justice centres, including a mass break-out from Malmsbury Youth Justice Centre involving 15 inmates who allegedly went on a 24-hour crime spree.

Wyndham Council also opposed the original proposal, arguing it was not consulted about the jail being built in an area already earmarked for a technology hub.

Mayor Henry Barlow said he was pleased the Government had chosen another site within the council boundaries.

"We were never against a facility like this, we just didn't agree that was the site for it," he said.

"In the future it will be a great economic boon for this municipality."

Ratepayers of Werribee South president Dr Joe Garra said he was relieved common sense had prevailed.

"It was just the most ridiculous site they could have picked in Wyndham," he said.

Opposition Leader Matthew Guy accused the Government of lurching from one crisis to another.

"It's just another panicked decision from a Government losing control of our justice system," he said.

The youth justice centre is scheduled to be built by the end of 2020.