The train tracks had suffered damage during the wild weather and heavy rainfall over the weekend when as much as 70mm fell over 24 hours in some areas.
Pictures from the scene of the derailment appear to show the rail tracks buckling as water seeps underneath the vital lines.
Authorities have confirmed no injuries have been reported yet, but they will be left with a large clean-up. Emergency services said there were no dangerous goods on board the train.
Investigators are on site trying to determine the cause of the devastating incident.
The Inverleigh area, just 30km from Geelong, copped nearly 30mm of rainfall on top of previous flooding.
The derailment comes as households across Victoria are reporting blackouts following the wild weather.
Flash flooding has closed lanes on the crucial ring road, so motorists are being urged to take care.
Unfortunately for flood-weary communities, further rainfall is forecast for today before chilly temperatures and more settled weather moves in.
The SES said it had received more than 400 requests for assistance in the last 24 hours as floodwaters rise again in already saturated regions.
