Yarra Valley Dairy, in the town of Yering, was slapped with a fine by the Environment Protection Authority Victoria after failing to comply with a remedial notice designed to stop an odour from escaping its premises.

EPA Northern Metropolitan Regional Manager Jeremy Settle said the smell, which was likened to that of "sour milk with earthy characteristics", was "unreasonable" and strong enough to cause "discomfort" in the surrounding community.

"After a VCAT challenge to our original notice issued in May 2021, we issued an amended notice in October, but when EPA officers arrived in December to check on compliance, the odour on St Huberts Road was strong enough to cause discomfort when facing into the wind," Mr Settle said.

"The company had complied with some of EPA's requirements, but not all, and the odour was still there," he said.

EPA found Yarra Valley Dairy failed to make the necessary improvements to its wastewater treatment in order to prevent the smell from impacting neighbouring properties.

The company was fined $9,087 for contravening a section of the Environment Protection Act.

Australian Associated Press