Terrified passengers, including a baby, were tossed around a tram as it flew off its tracks and into a woman's front yard in inner Melbourne this morning.

First responders say it is incredible that no one was seriously injured in the crash, which occurred in the inner-city suburb of Kew just before midday.

"Clearly, it's lucky there was no pedestrians involved, otherwise we would be looking at more serious injuries going on," Melbourne's Metropolitan Fire Brigade Commander Brett Cowcher said.

Twenty-five people were on board the tram at the time.

A white car is believed to have sparked the destruction when it knocked the tram of its tracks. (9NEWS)

The tram smashed through a fence and into a neighbourhood front yard. (9NEWS)

"Out of nowhere the glass from the door shattered and I instantly fell off my seat and onto the glass," one passenger, Logan Chang Garvey, told 9NEWS.

Another passenger, Mira Banjac, described how the 25 passengers on board were thrown onto the floor in the collision.

"I just fell on top of them - almost on top of them - and everybody was on top of each other," she said.

Some passengers escaped with just cuts, while others had to be taken away on stretchers.

The crash occurred on Cotham Road, with witnesses telling 9NEWS that a white car sparked the collision when it tried to squeeze between the tram and a roadworks machine, causing the tram to derail.

The 74-year-old driver will be interviewed by police, along with the tram driver.

Emergency services say it was extremely lucky that no one was seriously injured in the crash. (9NEWS)

An elderly woman was in the garden at the time, when she looked up to see the tram just centremetres away.