Born in Melbourne to Italian parents, he was the first person from a non-English speaking background to ever be appointed a state governorship.

Prime Minister Scott Morrison described Sir Gobbo as "the quintessential Australian success story".

"Sir James was rightly proud of his rich Italian heritage and of the multicultural nation he served. In so many ways Sir James was the father of modern multiculturalism in Australia, which stands as one of his most significant legacies," Mr Morrison said.

Premier Daniel Andrews paid his respects to the man who led a life of service, as governor and lieutenant-governor of Victoria and a Supreme Court judge.

"I am saddened to learn of the death of former governor of Victoria, Sir James Gobbo and offer my condolences to his family during this difficult time," Mr Andrews said in a statement on Monday.

"His family have accepted a state funeral where we can pay tribute to his legacy and contribution to the Victorian community."

Sir Gobbo was appointed to the Supreme Court of Victoria in 1978 and knighted in 1982 for his services to the community. He was made a Companion of the Order of Australia for his work contribution to the law, multicultural affairs and hospitals in 1993.

After retiring from the bench, he was appointed lieutenant-governor of Victoria in 1995 and governor in 1997.

However, Sir James was sensationally dumped from his role as governor in 2000 by then-Labor premier Steve Bracks because he was a member of a Liberal-dominated lunch club

Liberal MP Matthew Bach said Sir James had changed Victoria and the nation for good.

"He was a proud advocate of multiculturalism and a champion of the diverse migration policy upon which our state is built," he said.

Sir James' niece Nicola Gobbo made headlines in recent years after working as a police informer between 2005 and 2009 while acting as a legal adviser for some of the most infamous criminals in Victoria.

He had previously said the pair had not spoken in years.

The funeral will be held on November 16 at St Patrick's Cathedral.

Australian Associated Press