"Death to 'Australia'" was spray-painted on one of the two statues targeted between Wednesday night and Thursday morning at Melbourne's oldest park, Flagstaff Gardens.
Heavy machinery was used to tear down the Pioneer monument, erected in 1871, before the badly-damaged ruins were vandalised, police believe.
The five-metre tall, sandstone obelisk marks the city's first burial site.
The nearby Separation memorial, erected in 1950 to commemorate the founding of the Victorian colony a century earlier, was similarly defaced.
"This sort of behaviour will not and cannot be tolerated in Melbourne," Melbourne's Lord Mayor Nicholas Reece told ABC Radio on Thursday morning.
He added the incident occurred despite cameras and fences being installed to protect statues and monuments in the lead up to Australia Day.
Mr Reece described the vandals as "idiots," adding they failed to understand the historic significance of the monuments they targeted.
Similar vandalism offences have occurred in the lead up to Australia Day in recent years, often targeting sites dedicated to the city's colonial past.
In 2025, vandals toppled a statue of Captain Cook at the entrance of Edinburgh Gardens in Fitzroy North during the January long weekend.
The City of Yarra voted to scrap the statue in May 2025 due to the high cost of its upkeep, given it was repeatedly targeted by vandals.
Mr Reece said the price of repairing the Flagstaff Gardens monuments was not yet clear, but insisted they would be reinstated.
"We cannot allow it to be the case that when statutes (and) memorials are destroyed ... that is rewarded by allowing it to continue," he said.
A crime scene has been established at the site as police investigate.
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