ISRAEL'S announcement of a ceasefire in Gaza has not deterred thousands of Palestinian supporters from marching in Melbourne to condemn the violence.

As many as 12,000 people gathered on the steps of Victoria's State Library today in support of Australians for Palestine, waving Palestinian flags and carrying placards calling for an end to what was described as a "massacre".

Israel held its fire in Gaza on Sunday after declaring a unilateral ceasefire in its 22-day onslaught, which has killed more than 1,200 Palestinians.

South Australian Greens senator Sarah Hanson-Young welcomed the ceasefire announcement but said Israel must now withdraw its troops from Gaza.

"Without that, we're not really achieving stability and we're not really putting ourselves in the best position for peace in the long term," she told AAP at the rally.

"We must ensure that countries like Australia, regardless of whether there is a ceasefire or not in the next few days, still come out and condemn the disproportionate violence that has been going on."

Senator Hanson-Young also addressed the crowd, calling on Prime Minister Kevin Rudd to openly condemn the situation in Gaza.

"It's time Prime Minister Rudd condemns the violence in Gaza," she told the crowd.

"It's time Prime Minister Rudd gives Australia something to be proud of."

She said the government should call for the immediate withdrawal of Israeli troops from Gaza.

The protesters, estimated to number 12,000 by Australians for Palestine organisers, marched from the library to the steps of the Victorian parliament.

Other speakers included former Democrats leader Lyn Allison, Australian Council of Trade Unions international director Alison Tate, and cartoonist Michael Leunig.

A special service for peace was expected to be held at Melbourne's St Paul's Anglican Cathedral later on Sunday afternoon, attended by Anglican Archbishop of Melbourne Dr Philip Freier and World Vision chief Tim Costello.

A solidarity meeting to show support for Israel, organised by members of Melbourne's Jewish community, will be held on Tuesday.