Authorities said the fire had started in the Spring Valley Road area in Flowerdale yesterday afternoon and continued to spread throughout the bushland, with 700 hectares burned.
The man has been released pending further enquiries, and the investigation remains ongoing.
VIC Emergency has replaced the Watch and Act message as the fire is now under control and approximately 23 hectares in size.
Firefighters have stopped the spread of grassfire at Feehan's Road, Wildwood, near Deep Creek.
Police urge anyone with information to contact Crime Stoppers on 1800 333 000 or online at www.crimestoppersvic.com.au.
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