Waltzing Matilda and the national anthem blared on the steps of Victorian Parliament House at midday on Sunday as about 150 people gathered, flying Australian flags and red ensigns.
Attendees at the rally, organised by the far-right National Workers Alliance, turned out to show their support for Ben Roberts-Smith and other Special Air Service Regiment members under investigation for alleged Afghanistan war crimes.
Some were wearing war medals, as banners and placards proclaimed Roberts-Smith a "warrior not criminal".
The 47-year-old Victoria Cross recipient was charged earlier in April with five murder-related war crimes and has denied all allegations.
The decorated veteran distanced himself from the rally before it took place, saying neither he nor his family had any involvement in the event.
"What has happened is an absolute injustice," National Workers Alliance leader Matt Trihey told the crowd as attendees called for the charges to be withdrawn.
"We are here for the veterans who are having their legacy, their honour and their integrity questioned by what is an illegitimate government that is acting against the will of the people."
The National Workers Alliance's publicly stated goals include a moratorium on all immigration and the "preservation of Western culture and identity".
A small group of counter-protesters opposed the group, separated by two lines of police.
Brandishing their own banners, the group attempted to shout down the rally with chants of "always was, always will be Aboriginal land" and "Nazi scum off the street".
The Roberts-Smith supporters then took to the streets, shutting down busy corridors and blocking trams while curious bystanders watched on.
One rally participant was seen yelling at people in an al-fresco dining setting, telling them to "go back to where you came from".
A spokesperson for the former SAS soldier said he and his family were not in any way connected to the Melbourne rally.
"Mr Roberts-Smith and his family are not in any way involved in this rally, nor associated with its organisers, and have not been consulted by the group in question," they told AAP.
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