On November 27, 1967, a major fire broke out in the upper floors of the building. By the time the fire was controlled, the three upper floors were badly damaged by fire with extensive water damage to the lower floors.

The fire was detected shortly after 2pm and was apparently centred in the main incoming conveyor system. The extensively mechanised mail opening system on the fourth floor was completely gutted together with the adjoining Administration area destroying many records.

The Mail Opening system was equipped so that bags of mail could be mechanically conveyed from the unloading docks via checking systems and storage places and delivered to unloading bins. The handling systems for OAs was designed to receive all newspapers, packets, books etc after release from the opening bins and conveyed directly or via storage units to the mail OA sorting machine. After sorting, automatic clearing and conveyor systems either delivered the articles to final bags or transferred them to a secondary sorting machines.

Equipment on the third and fifth floors was also damaged but fortunately prompt action by the firemen restricted the damage to the primary letter sorting machine on the third floor.

Damage to mail was mostly restricted to second class mail though several bags of first class mail were destroyed. many thousand letters, packets and parcels were rewrapped and despatched under official covers.

By evening, emergency sorting equipment had been installed and a limited despatch made the next morning.

An emergency mail processing facility for mail opening and OA sorting was set up in, South Melbourne. Mail bags were opened on trestle tables and all clearing performed manually.

The assistance of the general public was sought to restrict the amount of mail posted to urgent items only.

Within ten days, a series of makeshift opening bins had been installed in an annexe to the Mail Exchange. Two short length conveyors were positioned to run parallel to the row of opening bins so that letters and OAs could be conveyed separately to wheeler bins. Because the Annexe was serviced by only a small lift, it was necessary to install an external bag hoist to ensure a satisfactory intake of bags.

From the Opening Section, letters were transferred to the normal mechanical handling system in the Mail Exchange but the huge volume of OAs had to be sorted into bags hanging on bag racks and cleared manually.

The lower floors of the Mail Exchange were ready for occupancy by December 3rd. By Christmas Eve, every Christmas packet for despatch had left the building.

An OA machine was transferred from interstate and part of the previous machine reconstructed.

By dent of hard work, the lower four levels were cleared and back in service in a short period... However, some letter sorting equipment had been severely damaged in the fire. The upper floors and the new letter sorting machinery was not placed in service until the following October.