A stone's throw from Chadstone shopping centre, the Oakleigh Centre is home to 29 people with intellectual disabilities.

Disability advocates have been calling for the centre's closure for years, and now the Napthine government has granted their wish by providing $14.1 million in next week's budget to fund the residents' relocation.

"This is the end of an era which everyone will be happy to see the back of," Community Services Minister Mary Wooldridge said.

"Large institutions for people living with a disability are a thing of the past."

She said the announcement meant all remaining Victorian disability institutions had a plan for closing down.

Community Visitors, independent watchdogs for the disabled, have raised concerns about the Oakleigh Centre for years.

It has outdated bathrooms, cramped corridors and crowded communal facilities.

Public Advocate Colleen Pearce said: “This is a landmark announcement in the history of disability services in the state. We welcome the announcement of the closure of one of Melbourne's last institutions for people with a disability.”

Bernadette Rodwell lived at the Oakleigh Centre for two years but recently moved into a smaller group home.

The 43-year-old, who has an intellectual disability, said she did not want to live with so many people.

“It's great what they are doing. It makes me happy," she said of the announcement.

Oakleigh Centre manager of accommodation Bas Arkenbout said the funding would transform the lives of residents who live in mediocre accommodation.

"There's no individuality, so everything is by the masses. There's one large television in the lounge room, so if they don't like watching that they are forced to go to their rooms. If they want to invite people over there is nowhere to take them."