St Joseph's church on Otter street suffered major damage in April 2007 when over half the structure was destroyed in a fire reportedly caused by an electrical fault.
The structure was completed in 1862 but only the church foundation remains, which are propped up by construction beams.
Development plans were put on display in February to build a new library, playground, and prayer hall.
Community worker Barbara Sullivan formed Save St Joe's to preserve and restore the church remains.
“We’re altering an 1860’s building," Ms Sullivan said. "The old church should be treasured, we need those symbols… it is one of the oldest catholic churches in Victoria. It’s an important part of Collingwood’s history.”
“They were going to use the walls from the church, which would have been better than what they are planning to do now. They’re talking just about knocking the walls down and having it as a playground for the kiddies.”
The redevelopment was supported by the church's 200-strong Vietnamese parish.
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