The (Ballarat) Courier reported the nugget was found about 2 feet underground in Ballarat by a local prospector who took it to the Ballarat Mining Exchange Gold Shop.
Gold shop owner Cordell Kent said the nugget would be worth about $300,000 by weight but actually is more valuable left in its natural state.
"I can't remember a nugget this big ever being found locally," he told The Courier.
He said a find like this "gives people hope" and predicted a fresh gold rush.
2014: The Year in Music [PHOTOS]