The propaganda footage contrasts tranquil Melbourne streets with scenes of chaos and war in the Middle East.
The video calls for home-grown attacks on prominent Melbourne sites including the airport and St Paul's Cathedral.
Justice Minister Michael Keenan said it did not represent an increased threat.
"All Australians and Victorians in particular should feel very confident that our efforts are doing what they're required to do and that is keeping our country safe from this fanatical terrorism organisation," he told the Herald Sun newspaper.
