Dramatic eyewitness pictures show thick black smoke and flames billowing from the wreckage.
Five people, four American tourists and an Australian pilot were aboard the plane and died in the incident.
He added: “Just a ball of flame going up in the air."
It is believed the passengers aboard the private charter flight were all golfers, visiting a course at King Island.
Jason from Adelaide was in a taxi when he saw the horrifying scenes unfold.
He said: "The plane was coming way, way fast. I thought that's faster than normal.
"It looked like it hit the building, there was a massive fireball. I could feel the heat through the window.
"Then a wheel, it looked like a plane wheel, bounced on the road."
It is believed the plane made two mayday calls during takeoff shortly before the crash.
Victoria Police Minister Lisa Neville described the incident as a "very, very tragic incident".
The families of two of the passengers Greg De Haven and lawyer Russell Munsch have paid tribute to them on social media.
The small aircraft which crashed into the shopping centre is a VH-ZCR plane operated by boutique private charter company Corporate and Leisure.
The shopping centre was not open at the time.
