The number dropped because some people thought to have been killed turned up alive and some remains found were determined to be animals, not human.
Victoria Police Deputy Commissioner Kieran Walshe said the latest count put the toll at 173, down from 210 on Feb. 23, The Age reported.
However, Walshe said, some families may never have their loved one' remains positively identified.
"The damage that fire does to the human body is absolutely extreme," he said. "Because of the ferocity of the fires, we will get to a point that there will be remains that cannot be formally identified."
The state coroner's office says it has officially identified 87 of the victims, The Age said.
Puzzle-maker slips 'Murdoch Is Evil' into Rupert Murdoch's Sunday Telegraph
Exploding whale video goes viral on Internet