A pilot has been killed in a mid-air collision over Melbourne in south-eastern Australia.

One of the planes involved in the collision landed safely at Melbourne's Moorabbin airport, but the other crashed into the garage of a unit in Cheltenham.

The Cessna 150 aircraft then burst into flames, killing the pilot.

Alex Mickham, who lives next-door to the unit, says he evacuated his home as soon as the explosion happened.

"It went right in the garage and it burst and the fire started," he said.

"It was all red and I was in such shock."

Another eye-witness, Andrew Matthews, says he saw the plane nose-dive.

"I followed the smoke and it was out the back of a house. It must have been their shed or balcony or something."

"The people had just come out of their house. Not even about five minutes later the fire brigade and police rocked up. And it was a bit hard to believe."

The Civil Aviation Safety Authority (CASA) says the Cessna 150, which is a two-seater training plane, collided with a Piper Warrior, which seats four people, just after 12.30pm.

A CASA spokesman, Peter Gibson, says it is not clear whether the planes were flying under the guidance of the airport's air traffic control.

"At this stage we don't know what the flights were, but it's likely they were training flights," he said.

"Both aircraft were operated by the Royal Victorian Aero Club, which obviously is a major flight training organisation."

Cheltenham East Primary School, which is near the scene, has been shut down but police say the students are safe.

Police and rescue teams are at the scene of the crash.

Police say the pilot of the Piper Warrior aircraft is unhurt.