The Victorian town of Winchelsea is no longer under threat from a grass fire.

The CFA says the grass fire has shrunk from 350 hectares to 250 hectares and is no longer expected to impact the town.

Residents in Inverleigh, Gnarwarre, Buckley, Moriac and Winchelsea have been told to monitor the situation, but the blaze is being brought under control.

"The wind change has come through, and it wasn't as bad as expected," the CFA spokesperson said.

"It is still gusty down there, but they have a lot of resources.

"It's still moving but slowly."

A 35-hectare fire burning at Lake Mundi, also in the state's southwest, has been brought under control.

Thunderstorms and strong winds are expected to continue throughout the day, creating the potential for further fires, a joint CFA and DSE media release said.