Residents gathered at the Parliament of Victoria on Thursday to urge Mr Guy to reject a proposal for Tarran Valley Estate - a 43-lot housing development on 125 hectares of land about two kilometres from the town centre.

Group spokesman Ian Slattery said an urban housing development would cheapen Maldon's appeal.

"People don't move to Maldon to experience urban-style living, they move there to get away from that," he said. 

"This is a small town, which has been preserved with 19th-century architecture.

"We don't want to see it littered with cheap, brick veneer homes. If you want that go live in Sunbury."

The development was approved by the Mount Alexander Shire Council seven years ago, but is pending approval from the state government, following recommendations from an advisory committee.

Member for Bendigo West Maree Edwards and the Victorian Labor Party have embraced the protesters' cause, with Ms Edwards presenting a 500-signature petition to Mr Guy three months ago.

Ms Edwards said Maldon was a significant town with an abundance of heritage-listed buildings.

She said a housing development would detract from Maldon's important tourism industry, which the town relied on.

Mr Guy said he would consider Maldon's heritage value when making his decision.

"I will look at the Independent Advisory Committee's recommendations and comments on heritage matters, as any reasonable person would expect me to do," he said.

But he questioned Ms Edward's assertions about Maldon's tourism industry being affected by the development. 

"What evidence is there for this claim?" he said.

Council sustainable development director Jason Taylor said the council did not think the estate would pose a threat to  the town's heritage value.

"There are local planning controls in place including a Significant Landscape Overlay in Maldon to provide guidance design and development," he said.