Four others were injured, including a boy who was last night fighting for life in hospital.
Police said the BMW SUV mounted the kerb and struck a number of patrons at the Royal Hotel on Vincent Street just after 6pm.
Two men, a woman and a child died at the scene, police said in an update at midnight.
A female child was flown to hospital, where she later died.
A male child was flown to hospital with critical injuries.
Three others were taken to hospital with non-life-threatening injuries: a man, a woman and another male child.
The driver of the BMW, a 66-year-old Mount Macedon man, was taken to hospital with non-life-threatening injuries.
"The exact circumstances surrounding the collision are yet to be determined and investigations remain ongoing," police said.
The tiny town 90 minutes north-west of Melbourne was inundated with emergency services last night.
The street around the pub was sealed off with police tape.
A car was also seen taped off by police.
Abandoned drinks could be seen on picnic tables set on a grass area.
An emotional Kimmi Moscicki said she was at the RSL nearby when she heard a noise.
"We all turned around and we saw a car rocket-launch and a lot of bodies flying through the air," she said.
"Nearly everyone that was out tonight was helping as much as they could.
"Unfortunately there's a lot of people that have been killed.
"We don't know why it's happened.
"Basically it looks like it's a bomb's gone off."
Local MP Catherine King said her "thoughts were with those at the scene, their friends and families and the broader Daylesford community".
Police said they were looking for witnesses and anybody with video footage.
Ambulance Victoria said four of the injured people were flown to hospitals and three others were taken by road.
The flown patients include two taken to the Royal Melbourne Hospital, one to the Alfred, and one to the Royal Children's Hospital. Those taken by road include two to Ballarat Base Hospital and one to the Royal Melbourne Hospital.
https://news.google.com/rss/articles/CBMic2h0dHBzOi8vd3d3LjluZXdzLmNvbS5hdS9uYXRpb25hbC9kYXlsZXNmb3JkLXB1Yi1jcmFzaC12aWN0b3JpYS12aW5jZW50LXN0cmVldC9jZjU3NWQxOC04NTk2LTQxMzQtYTk5Zi0xZjcyNjUyZjYxMzHSAQA?oc=5
2023-11-05 14:06:46Z
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