Combustible cladding plastered across a Docklands high-rise will be stripped from the building after it was found the imported material posed a "significant and unacceptable" risk to hundreds of residents.

On Monday, the Building Appeals Board ordered the owners to remove the material. It quashed a bid by LU Simon Builders to keep the cladding and instead install more sprinklers, saying the equipment might fail with "catastrophic" results.

The ElenbergFraser-designed and Charter Hall-developed Lacrosse building in Docklands is considered safe to live in. Credit:Chris Hopkins

"The risk posed by the current cladding is so serious that it is necessary to have a building order which requires the owners to remedy the situation," the board found.

The decision means the 470 owners of the Lacrosse apartments could be left with an $8.6 million cladding replacement bill, on top of $6.5 million already spent to fix damage from a fire that tore up the 21-storey building in November 2014.