
Police are investigating the 160-year-old building, which was being converted into a mosque.
Victoria Police said they were investigating but didn't believe the fire was targeted.
CFA crews were called to the blaze at the 160-year-old building in Powlett Street, Kilmore shortly before 2pm on Tuesday.
The CFA said the fire was brought under control within 20 minutes but the building sustained significant damage.
Victoria Police said the fire was deemed suspicious and a crime scene was set up.
The heritage listed building was formerly the Wesleyan Methodist Church and was built in 1858, according to Heritage Victoria.
The Kilmore Islamic and Community Centre was in the process of converting the church into a mosque.
Nobody was in the building at the time of the fire.
Victoria Police said on Wednesday morning that the fire was not being linked to any other fires and was not believed to be targeted.
A police spokesperson said the "derelict building is often frequented by trespassers".
However, Ekrem Fuldagli from the Kilmore Islamic and Community Centre, which now owns the building, said he believes it was a targeted attack.
"It's a deliberate arson attack but the police, I must make this known, are still conducting their investigation," he told ABC Radio Melbourne.
Fuldagli said Kilmore was a welcoming community but that he had experienced rising Islamophobia from some people.
"The fear and the hate is on the rise and people feel emboldened to act dangerously," he said.
Read More:
He said the fire had put plans to renovate the building on hold.
"Our dreams have been put back now," he said.
"All I've got to say is thank God no-one was seriously injured or killed."

Fuldagli said a business operated by a member of the Muslim community in Kilmore was targeted by an arson attack the previous night.
Victoria Police said a blaze was extinguished at a property in Sydney Street, Kilmore and an investigation into the fire was ongoing.
A police spokesperson said the exact circumstances surrounding the blaze were yet to be established.
Source: abc.net.au