Three families were at the Royal Daylesford Hotel sitting in the roadside beer garden when a BMW SUV mounted the kerb and hit patrons about 6pm on Sunday.
A 38-year-old Tarneit man and his 11-year-old son were killed at the scene while his 36-year-old wife and six-year-old son were hospitalised.
A 44-year-old Point Cook woman, named by media as Pratibha Sharma, was killed along with her partner, 30-year-old Jatin Chugh, and nine-year-old daughter Anvi.
A 43-year-old Kyneton woman and a 38-year-old Cockatoo man were injured and both flown to the Royal Melbourne Hospital.
An 11-month-old boy with them was injured but is in a stable condition at the Royal Children's Hospital.
The baby's mother, a 34-year-old woman from Cockatoo, was not injured.
More than 200 community members gathered at a vigil at Daylesford's Victoria Park on Monday night, including Victorian health minister Mary-Anne Thomas and federal infrastructure minister Catherine King.
The leaders urged the emotional crowd to reach out to support services if they were struggling as a sombre mood fell over mourners huddled on the edge of a football oval.
A steady stream of people, including families and community members, arrived throughout the day to lay flowers and leave teddy bears and messages of condolences at the site of the crash.
"(We) are broken. Rest in peace," one message read.
The pub's owners expressed their deepest sympathies for those killed and injured in the incident in a social media statement and confirmed the venue would be closed until further notice to assist police with investigations.
"All the staff at the hotel are extremely distressed and we have counselling on site to assist the team to manage the impact of the events," they said.
Emergency personnel and first responders have been deeply affected by a fatal crash in Daylesford.
Chief Commissioner Shane Patton said the crash was an "absolute tragedy" and commended first responders at the scene, including officers who heard the crash from the local police station and ran over.
"But it comes at a cost as well," he told reporters on Monday.
"They will take that scene with them for many, many years - some may never lose that scene.
"It may haunt them forever."
The 66-year-old driver is expected to remain in hospital overnight with shock and non-life-threatening injuries.
Police expect to speak to him on Tuesday.
Mr Patton said the man returned a negative breath test at the scene and is not known to police.
Crash reconstruction specialists are trying to piece together what happened.
Victoria Ambulance regional director Trevor Weston said emergency crews were confronted with a chaotic scene.
He commended the efforts of people who came to the aid of the injured until paramedics arrived.Â
"(Injuries were) quite traumatic for a number of those patients, particularly the four that were airlifted to hospital," he told reporters on Monday.
Some of the initial crews were from the area, he said.
"Any incident involving children is that next level of distress for our paramedics but the crews that responded last night did so professionally and provided the best care they could for all of those patients," Mr Weston said.
Hepburn Mayor Brian Hood said Daylesford would have been crowded on Sunday, with many people enjoying the warm evening on the unofficial Melbourne Cup long weekend.
"This will send shock waves through the community for some time," he told ABC TV.
First responders to the Daylesford crash were confronted by chaotic scenes.
Police have asked the public to avoid Daylesford so emergency services can access the scene.
Politicians including Premier Jacinta Allan, Opposition Leader John Pesutto and local MPs thanked those who went to the victims' aid and offered their condolences to those affected.
Anyone who witnessed the crash or has dash cam or CCTV footage is urged to contact Crime Stoppers.
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