A tense standoff is developing between Melbourne City Council and Archibald painter Vincent Fantauzzo after a mural by the artist in a city laneway was removed by cleaners on Thursday.

Fantauzzo said he was "gutted" by the council's decision to remove the mural, which they deemed a "safety risk", and has accused them of damaging the laneway in the clean-up process.

"I'm just devastated, actually. No one until this point has contacted me personally or given me any indication of it being painted over," he told Fairfax Media.

"They've completely trashed the laneway. All the walls and bitumen are ripped up just because of some paint.