About 300 Richmond residents were moved to safety after the arm of the crane on Lennox Street was blown backwards and bent in gale force winds late on Monday night.
Nearby trams were stopped as a precaution and busy Bridge Road was temporarily closed as workers prepared to stabilise or dismantle the crane.
Richmond Town Hall was being used as an evacuation centre on Tuesday morning.
Work to stabilise the crane was delayed until first light, with emergency crews at the scene and traffic on Lennox Street closed from Highett Street to Swan Street in nearby Cremorne.
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Michael Clark, of the operator Clark Cranes said it appeared that the gib, or arm, of the crane was not left in the correct position, which would have allowed it to move freely in windy conditions.
“If the gib is left up too high, the wind can grab it and push it backwards, which it has done, unfortunately,” Mr Clark told 3AW radio.
“At some sites people complain about it overhanging a little bit, and so builders lift it up that little bit more to appease the residents,” he said.
Work to stabilise the crane was delayed until first light, with emergency crews at the scene and traffic on Lennox Street closed from Highett Street to Swan Street in Cremorne.
The operation to stabilise the crane comes as the Bureau of Meteorology (BoM) issued a severe weather warning for Tuesday after a night of powerful winds.
Strong winds caused widespread damage across Victoria overnight, with about 1500 properties still without power in Melbourne, mainly in the city’s outer east and south east.
The State Emergency Service said it received more than 373 calls for assistance across Victoria, mostly for fallen trees.
Pakenham to Melbourne’s south east was the worst-affected area with 20 calls for help.
The BoM said gusts of about 90 kilometres per hour hit most Melbourne suburbs between 7:00pm and 10:00pm, with winds of more than 110kph recorded on Port Phillip Bay.
The BoM issued another warning Tuesday as a cold front moved eastwards across Victoria, with residents told to take measures to protect lives and property.
Winds were expected to peak at 90km/h from South Australia to the NSW border, the bureau said.