The establishment of a psycho-surgery centre at the Royal Melbourne Hospital is being attacked by members of the Citizens Commission on Human Rights.
More than 100 people have marched through central Melbourne to protest against the treatment of mental conditions through surgery.
Spokeswoman Lyn Cottee says procedures such as lobotomies, which leave people permanently disabled, must not be allowed.
"The popular misconception is that lobotomy was banned, however it wasn't, it's now seeing something of a resurgence," Ms Cottee said.
"And what we are actually saying is we cannot let this sort of grotesque mind control procedure occur - it's time for an outright ban on this."
A spokesperson for the Royal Melbourne Hospital says only a handful of psycho-surgery procedures are carried out each year.
She says the hospital is not establishing a centre for psycho-surgery as such, as it would have to involve considerable research funding.