Melbourne's Federation Square has been blanketed in hand-knitted poppies, woven individually and donated from around the world to honour fallen soldiers for the Anzac centenary.

The project was the brainchild of Melbourne woman Lynn Berry, who first put out the call two years ago requesting 120 poppies to honour her father, who served in World War II.

After quickly reaching her goal, she took the project online and set a new challenge in a blog post to collect 5,000 poppies.

She ended up receiving more than 250,000 poppies from all over Australia and overseas.

Each poppy is accompanied by a story of love, loss or gratitude for servicemen and women.

"This has been a very personal journey for many people. There are many dedications on them, they're very heartfelt," Ms Berry said.

"We estimate there are about 50,000 people involved. Children, people in retirement villages, CWAs, RSLs, there are no barriers."

Dozens of volunteers worked to connect the poppies to a wire carpet which has been laid over the steps of Federation Square in several panels.

The panels will be moved to the Princes Street Bridge for the Anzac Day parade, to line veterans as they march between the city centre and the war memorial.

The poppies will later tour Australia for the centenary before finding a permanent home, which Ms Berry hopes will be at the National War Memorial in Canberra.

"We are stunned and amazed by the response," Ms Berry said.

"Some of the dedications [on the poppies] are actually really heart wrenching. People entrust us with their stories.

"There is the most incredible pain people have suffered over many generations and we feel humbled to be sharing in those."

The concept has taken on a life of its own, with regional towns beginning their own knitted poppy tributes, while New Zealand is believed to have created more than 50,000 for their own Anzac commemorations.

Ms Berry has asked people to stop sending the poppies to her Glen Iris post box, and instead to continue making them for their own communities.