The tram was covered in hand-made crochet inside and out with bunting and blankets dominating the decor.

Bendigo Tramways staff believe the tram was targeted as part of the Bendigo Sheep and Wool Show, which is on this weekend.

Crew and conductors have decided to keep the moving masterpiece for a number of weeks to showcase the craftsmanship that has been installed on it.

Bendigo Tramways' team leader Anita Bagley said there were a lot of good comments from passengers.

"It looks spectacular and is definitely colourful," she said.

"A lot of people are here for the Sheep and Wool Show and the tram is full of bright colours and (crocheted) blankets to go over people's knees.

"Even the tram drivers have got into it by wearing woollen shawls.

"We have also got a lot of odd looks from motorists who are wondering what it's for."

Tram driver Julie Cain got into the spirit of the woollen takeover by wearing a shawl to match the decor.

"I've driving it all morning and having a lot of fun," she said.

"I got issued a new sort of uniform and it has been brilliant.

"It certainly wakes you up for a shift, the girls who have done this have done an outstanding job.

"It's brightened up winter and has certainly been turning a lot of heads (throughout the day)."

Tram No. 302 already has a colourful history after the State Electricity Commission tried to sell it to a museum in Adelaide in the 1970s.

“The story about saving Tram No. 302 is symbolic of how the tramways itself was saved and has resulted in us still running trams today," Bendigo Tramways manager Jos Duivenvoorden said.

"So, if any tram was to be caught up in dubious activities, it was always going to be this one."

For people who might have missed the tram on Friday, Bendigo Tramways said the tram would operate on the tracks on Saturday afternoon and all day Sunday. 

But if you can't make that, the tram will remain dressed in wool for a number of weeks and can be seen at the Bendigo Tramways Depot and Workshop.