The digital sign featured rolling images of people from various cultural backgrounds, and one picture of two hijab-clad Muslim girls in front of the Australian flag sparked furious debate among social media users.
Hundreds of people criticised the image for being "too politically correct" or not a true reflection of Australia Day, the Australian Associated Press reported.
The large billboard, hosted by outdoor media company QMS, was part of a broader Victorian government campaign to promote Australia Day, which is the country's national day celebrated on January 26.
"Anyone who considers this a victory needs a refresher on the true meaning of Australia Day. It is about bringing people together and celebrating the diversity which makes this state and this country great," Scott was quoted as saying.
"It's very disappointing to see a small minority attacking proud Australians for their love of their country," he said.
Angry comments about the sign, erected alongside a freeway interchange began on Friday when it was shared on Facebook by a number of far-right groups including the United Patriots Front.
The billboard was slammed as "un-Australian" by Facebook commenters, whose general consensus was that images of beaches, barbecues and beer were the only true way to reflect the national day.
"This isn't a reflection of Australia Day, are we losing our own culture to be politically correct??," Sydney woman Liz Parker wrote on Facebook.
But not everyone was critical. Gina Rose posted, "We are a multicultural nation, if you have a problem with that, maybe you should leave."
Islamophobia Register Australia founder Mariam Veiszadeh said while the image of the two girls had been widely circulated, their families were trying to keep their identities quiet, to prevent further backlash being directed their way.
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