The 50-year-old man was flying a single-engine Cessna 172 aircraft that was torn to shreds by the crash in Mordialloc.
The plane took out power lines and part of a residential fence as it crashed in the middle of Scarlet St just after 5pm.
Scarlet St resident Vlad said it was “like a bomb went off”, with the plane coming down outside his front gate, just metres from his home.
“The pilot never had a chance. It would have been instant,” he told the Herald Sun.
He said the plane came down, touched the back of his car parked out the front and stopped.
“My wife and my 11-month-old daughter and my mother in law, we’re all very lucky,” he said.
“You don’t expect this to happen outside your front gate.”
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He said the child care facility behind his house was evacuated.
Another Scarlet St resident Justin Vance said it was just a “ball of flames” by the time he arrived on the scene.
“We saw the power lines move and we ran outside and saw a ball of flames,” he said.
“It was all over by the time we got out there.”
The crash site is less than 1km from the runway at Moorabbin Airport, and 25km south of Melbourne CBD.
Victoria Police spokeswoman Belinda Batty confirmed one person was on board and had died at the scene.
One local resident said he could see the burnt-out cockpit of the single-engine plane which came to rest in the middle of the street.
“By the look of it, he must have already been pretty low when he came down, rather than plunging from a great height,” the neighbour said.
“Someone said the plane bounced off the front fence of a house as it came down, just missing the house.”
Another neighbour, Robert Fox, said he saw firemen hosing down the burning plane, after sirens alerted him to the crash across the street.
“It was very intense, it was very strong. I guess it was the fuel tank,” he said.
Peter Hausler was at home when he heard the crash outside, and said he thought the pilot tried to avoid the buildings.
“It missed the house by a few metres,” Mr Hausler said.
“People were trying to get close to it. The flames were massive.”
Mordialloc resident Jane Treacy, 48, was driving her kids home from school along the Nepean Highway when she heard a noise and saw a plume of black smoke.
“I had the windows down and we could smell the burning fuel. It was crazy,” she said.
“It was a massive ball of black smoke.”
Kingston City councillor Geoff Gledhill said he spoke to a Scarlet St resident who claimed the plane struck a house and landed on the street, hitting a car.
Dozens of residents have also been left without power after the crash.
Motorists have been urged to avoid the area, with Warren Rd closed in both directions between Lower Dandenong Rd and Scarlet St.
Authorities are advising alternatives including Boundary Rd or Nepean Hwy.
Police will prepare a report for the coroner, and the exact cause of the crash will be investigated by Australian Transport Safety Bureau.
The bureau said in a statement that investigators would examine the charred wreckage and collect evidence from the scene tomorrow morning.
Melbourne was the scene of another shocking fatal plane crash last year, when a chartered plane flying to King Island, Tasmania, ploughed into the roof of the Essendon DFO on February 21. The pilot and four American golfers were killed.
A man was also killed in a light plane crash at Clyde North in Melbourne’s southeast after it crashed in a paddock last August.
And a Piper Aircraft departing from Moorabbin Airport smashed into waters off the Bellarine Peninsula in 2016, killing all four people on board on January 29.