Later the prince drove to another town, Flowerdale, where 13 people died and thousands of homes were destroyed.
Residents fought against the flames to save their school, pub and shop and in the aftermath of the disaster have rallied round and so far rebuilt 16 homes themselves.
Hundreds turned out to meet the prince, who told them: "I couldn't believe it when I drove through - the vast scale of it all. It really brings it home.
"It's great what you guys have done."
One of those he met, Gabrielle Denky, said: "He was devastated and saddened when we told him what happened to us."
William joined Flowerdale locals for a barbecue, all the time wearing a yellow ribbon in memory of those who lost their lives.
He then faced a few balls from youngsters on the town's cricket pitch, alongside Australian cricketers Brett Lee and Matthew Hayden.
Victoria's Premier John Brumby, who joined William on his tour, said the prince had seemed "staggered" by what he had seen.
The prince hit a few balls bowled by children in Flowerdale
"For those who lost family or lost property to have Prince William here and to be able to talk to him, to see that support, it's a great comfort to them," he said. "It's part of that rebuilding process."
Words for Haiti
The prince returned to Melbourne later on Thursday to attend a reception at Government House. It was part of celebrations for Australia Day - the national holiday commemorating the arrival of white settlers in 1788.
In his speech, he said: "Today on the outskirts of Melbourne, I was privileged to see the spirit of Australia in its purest, most magnificent form.
"The stories of suffering I have heard today inevitably made me think about the ongoing tragedy of Haiti. Our thoughts and prayers remain with everyone there."
The prince also joked about the kisses he had received from some female well-wishers during his time in Australia - adding that Prince Charles once enjoyed the same treatment.
"My father had such a great time here at school and is still misty-eyed about an immortal moment on Bondi [beach], when an Australian beauty planted a smacker on his cheek," he said.
"It's good to see this tradition is continuing."
William watched Roger Federer win at the Australian Open tennis tournament
William also said Australia had made a "profound impression" on his mother, Diana, when she had visited the country in 1983 along with the toddler prince himself.
Just before heading back to the UK, the prince made a brief stop at the Australian Open tennis tournament to watch Roger Federer beat Victor Hanescu in straight sets.
He arrived in Australia from New Zealand on Tuesday after his first official visit there representing the Queen.
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