Residents have been told they can return to their homes in Melbourne's south-east after a fire that began in a nature reserve raced quickly out of control, forcing evacuations.

The fire broke out at Cheltenham, about 18 kilometres from the CBD, at Park Road near the Cheltenham Golf Club and the local cemetery.

A Watch and Act message was issued for the suburbs of Cheltenham, Beaumaris, Black Rock and Mentone, but the fire has now been brought under control.

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Forty homes in the area were evacuated, but residents were later told they could return to their homes and all roads have re-opened.

A large emergency service presence will remain in the area as the cause of the fire continues to be investigated.

About 70 firefighters, four helicopters and more than a dozen trucks were on the scene.

The fire was burning in a bushy parkland area of what is otherwise a built-up suburb in Melbourne's bayside district.

Assistant Chief Fire Officer Brendan Angwin said the fire started in the nature fauna reserve and spread to grassland.

He said the blaze had burnt about 5 or 6 hectares and there were no reports of any lost structures.

"It burned up to the back of the school, it damaged some fences at the rear of Glebe Ave but firefighters with the support of helicopters have done an extremely good job to check this fire," he said.

"I believe it did burn through some of the grassland in the cemetery."

The cause of the fire is not yet known.

Smoke has been billowing across Cheltenham and nearby suburbs. ( ABC News )

Inspector Bruce Kitchen said the incident serves as a reminder to be "mindful and careful" in the hot weather.

"This could have been quite devastating if we hadn't acted quick enough," he said.

It reached 34 degrees Celsius in Cheltenham, with hot and windy conditions across Melbourne. Geelong had a top of 37 degrees.

Aerial footage of the fire shows what appears to be smouldering grave stones.

The MFB said it arrived on the scene within three minutes of being called.