The incumbent Labor Party government led by Premier John Cain Jr. won a third term in office, despite a swing against it, and only lost the seat of Warrandyte in Melbourne's north-east.

This was credited by commentators to a strong campaign targeting Liberal leader and future Premier Jeff Kennett whose aggressive leadership style was still seen as a liability, as well as continuing instability in the federal Coalition.

[1] Labor's narrow wins in middle class marginal seats saw it retain its majority despite the Liberals winning a bare majority of the two party preferred vote.

[2] Victorian state election, 1 October 1988Legislative Assembly << 1985–1992 >> Victorian state election, 1 October 1988Legislative Council On 23 May 1989, Jeff Kennett was voted out of the Liberal leadership in favour of Alan Brown; Brown led the party until 23 April 1991 when he was also forced out after a successful comeback by Kennett.

During Brown's period as Opposition Leader, the Liberals negotiated the first coalition agreement with the Nationals in over forty years, in part due to a belief by some (in spite of what political scientist Brian Costar called a "lack of psephological evidence to support this assertion") that had the parties been in coalition at the election, they would have won.