CFA duty officer Charles Cleary said he believed more than 50 cars were engulfed in flames.
Mr Cleary said 11 fire trucks attended the scene, as the fire was fanned by blustery winds.
Up to 30 crews worked to contain the blaze and were able to get it under control within half an hour.
Police evacuated a number of nearby properties and a Watch and Act Alert was issued to surrounding streets, as residents were told to stay inside and close all windows and doors to protect themselves from the toxins.
Mr Cleary said the fire affected a number of neighbouring fences in the area; however, no other structures were damaged.
“In cars there's always that toxic risk, as rubbers and plastics are burning as well as fuels and oils,” Mr Cleary said.
Police continued to patrol and cordon off parts of the area yesterday afternoon while they investigated the cause of the fire.
Two officers from Victoria’s Environment Protection Authority arrived at the scene late yesterday afternoon.