The hideous, mildly terrifying and rarely sighted frilled shark has turned up in waters off south-eastern Australia.

The species, whose ancestry dates back 80 million years, is known as the 'living fossil'.

It was caught on a fishing trawler in waters near Lakes Entrance in the Victoria's Gippsland region.

Simon Boag, from the South East Trawl Fishing Association, said it was the first time in living memory that a frilled shark had been sighted.

"We couldn't find a fisherman who had ever seen one before," he said.

The frilled shark is believed to be responsible for some of the ancient myths surrounding sea monsters. ( Supplied: SEFTIA )

"It does look 80 million years old. It looks prehistoric, it looks like it's from another time!"

He said local fishermen were left scratching their heads at the sight of the two-metre-long creature, whose head and body resemble an eel, but whose tail is more reminiscent of a shark.

The Commonwealth Scientific and Industrial Research Organisation (CSIRO) confirmed it to be a frilled shark, and while the species is known to the scientific community, it was a nonetheless rare and bizarre find for local fishermen.

"It has 300 teeth over 25 rows, so once you're in that mouth, you're not coming out," Mr Boag said.

"Good for dentists, but it is a freaky thing. I don't think you would want to show it to little children before they went to bed."

The species has been found as deep as 1,500 metres, but generally it lives in waters shallower than 1,200 metres.

Mr Boag said this frilled shark was caught at 700 metres, but there should not be any concern about repeat catches.

"Almost all the grounds deeper than 700 metres are closed to trawling, so there wouldn't be any pressure on them and there'd be very few caught," he said.

"This guy was just unlucky."

After being declined by the CSIRO, the frilled shark has now been bought by Griffith's Sea Shell Museum in Lakes Entrance.

"It's in our freezer at the moment," said museum owner Coralie Griffiths.

"It'll be two or three weeks before it's on display."