Saturday's colourful gathering proves Bendigo is a peace-loving community that respects religious diversity, says Muslim leader Heri Febriyanto.
"I feel so excited and so happy," he said.
"I'm so emotional ... so grateful and really happy people support it," he said.
"It a big win for all of Bendigo - we respect each other."
About 120 people gathered at Hargreaves Mall on Saturday morning to hold colourful balloons with tags reading "racism has no place in Bendigo".
The gathering was organised by the Uniting Church and Anglican Church as a means of countering anti-mosque protests, which have involved black balloons being hung in houses and landmarks across Bendigo.
Councillor Mark Weragoda, an Anglican of Sri Lankan background, hung colourful balloons in his front yard to replace black balloons placed there by anti-mosque protesters.
Cr Weragoda said despite mosque protesters' insistence their opposition to the development was not based on racial prejudices, he had received emails that suggested it was.
"I have received messages and emails linked to my colour and my race," he said.
"It certainly makes you wonder.
"In this type of society our community should be much more educated than to stoop to these levels."
People gathered at 10.30am and listened to brief speeches by Reverend Cynthia Page, Reverend Bryn Jones and Mr Febriyanto.
The crowd cheered when Mr Febriyanto said, "We respect each other - no racists!"
Reverend Cynthia Page from Eaglehawk Uniting Church said she was "blown away" by the turnout.
"If I lived in another country I would like to think I could worship how I would like to worship," she said.
"I would say to people worried about the mosque, you can't confuse people who are moderate with those who are extreme."
Mr Febriyanto said he wasn't worried about the heated opposition the mosque had attracted, including Councillor Elise Chapman's comments she was "not a fan of Islam".