Family groups were sitting outside the Royal Daylesford Hotel when a BMW SUV mounted the kerb and hit patrons about 6pm on Sunday.
A 38-year-old Tarneit man, named in media outlets as Vivek Bhatia, and his 11-year-old son were killed at the scene while his 36-year-old wife and six-year-old son were hospitalised.
Point Cook woman Pratibha Sharma, 44, was killed along with her partner, 30-year-old Jatin Chugh, and nine-year-old daughter Anvi.
Assistant Foreign Affairs Minister Tim Watts said the family was actively involved in Melbourne's Indian community.
"Pratibha was very well known in the community, she was a candidate for parliament ... I know Anvi was an enthusiastic Bollywood dancer," Mr Watts told ABC TV on Tuesday.
"We're working with the community. It's going to be a long recovery period from this tragedy."
An 11-month-old boy was injured but is in a stable condition at the Royal Children's Hospital.
More than 200 community members gathered at a vigil to mourn the crash victims.
The 66-year-old driver remains in hospital for shock and non-life threatening injuries and is expected to be interviewed by police on Tuesday.
He did not have alcohol in his system and was not known to police.
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 emotional crowd was urged to reach out to support services if they were struggling.
The vigil was moved from the local community centre to the park to accommodate a large turnout.
Devastated mourners streamed through the area to lay flowers, teddy bears and leave messages of condolences at the site of the accident.
"(We) are broken. Rest in peace," one message read.
Federal Infrastructure Minister Catherine King was among those paying their respects.
A counselling service has been set up at the community health centre for locals struggling to cope with the tragedy.
Chief Commissioner Shane Patton described the crash as an "absolute tragedy" and "one of the most confronting scenes that experienced officers have been to".
"Some may never lose that scene, it may haunt them forever," he said.
Politicians including Premier Jacinta Allan, Opposition Leader John Pesutto and Prime Minister Anthony Albanese thanked those who went to the victims' aid and offered their condolences to those impacted.
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