An inner-city Melbourne council will hold a "mourning ceremony" as part of its Australia Day celebrations next year, in order to mark changing attitudes towards the divisive date its mayor says.

Port Phillip Council will work with the Boonwurrung Land and Sea Council, which first floated the idea, to include an additional Australia Day service on the morning of January 26.

An Australia Day protest in Canberra this year. Credit:Jamila Toderas

The "Morning of Mourning" will not replace traditional Australia Day festivities, but will acknowledge the issues around the day and recognise the hurt it causes for many Aboriginal communities, as well as commemorating their ancestors and elders, mayor Dick Gross said.

"We have to recognise that Australia Day is a complicated day and I think it needs to be recalibrated to take into account the diversity of attitudes around it," Cr Gross said.