Demolition of one of Melbourne's best-loved music venues, The Palace Theatre on Bourke Street, began this week, ending a seven-year public battle to save the venue.

The 108-year old theatre, venue of The Metro nightclub for over 20 years from 1987 as well as a live music hall, played host to artists including James Brown, The Prodigy, Slash, Jane's Addiction, Arctic Monkeys and Queens of the Stone Age until its doors shut in 2014.

Demolition of the Palace Theatre in Melbourne commenced this week. Credit:Constantine Frantzeskos

With the site to be converted into a Marriott hotel after years of conjecture, councillors and music industry figures have lamented the demolition as an indictment on Victoria's heritage laws, which they say fail to properly recognise the cultural value of the state's venues.

The Palace was sold in 2012 to Chinese developer Jinshan Investment Group for $11.2 million.