Police said Olivia Goden appeared to have wandered onto Henty Street about 6pm and into the path of a ute.

Olivia was in cardiac arrest when paramedics arrived. They worked for 30 minutes before she was flown to the Royal Children's Hospital with severe head and chest injuries.

She remained in a critical condition before dying at 4.30am on Thursday.

The major collision investigation unit was called to the accident.

Speaking at the scene on Wednesday, Inspector Caroline West said all evidence suggested the driver of the ute was travelling within the speed limit.

"The two-year-old has run out from the front of her house and it appears there was nothing he could do to avoid the collision."

Olivia was the youngest of three children, and neighbours and friends left flowers outside the family's home, metres from the scene of the accident. Tabitha Tabone, who lives nearby, left a rose at the house on Thursday afternoon.

"Everyone in the community is supporting her; we're all here," she said.

Ms Tabone, 31, did not see the accident but said Henty Street was known as a busy road.

"We heard the helicopter go up [after the accident]. It was chaos, basically.

"The whole street is a hot spot."

Ms Tabone's children attend Pakenham Springs Primary School with Olivia's older siblings, and she often saw the family walking to and from school, which is only 15 minutes' walk away.

"I used to see them at school assembly every week," she said.

A neighbour said he heard the accident and was shattered when he found out Olivia had been hit.

"I heard the thud and when I realised it was a kid it put a shiver up my spine," David said.

"They are a very quiet family.

"She's the youngest. She's got an older brother and sister and they were always happy and liked playing with my dogs through the fence."

The driver of the ute assisted police with their inquiries and has since been released. No charges have been laid.

As of Friday the road toll is 268, four more than the same time last year.

-James Taylor and Nino Bucci/The Age