After a review, the church made the decision to raise the compensation cap for victims from £44,500 to £89,000 ($75,000 to $150,000).
After a series of allegations against the conduct of Catholic priests in the Australian city, the Archdiocese of Melbourne set up the Melbourne Response to investigate the accusations in 1996.
Complaints are assessed by an independent commissioner and referred on to a compensation panel.
More than 450 child abuse victims have come forward since the Melbourne Response was set up.
The commission has been highly criticised by victims and their families.
In a 2015 60 Minutes documentary, survivors said they felt their stories were not believed and that they should be entitled to higher compensation.
The review of the commission followed this documentary.
In a statement released on 18 November, Archbishop Denis Hart said: "The Melbourne Archdiocese is committed to a fair system of redress. We have decided it is right to both increase the compensation cap for survivors of abuse and re-visit cases for survivors of child sexual abuse if these survivors would have received a higher offer had the new arrangements been in force at the time their case was heard.
"The Melbourne Response has helped many survivors since its introduction 20 years ago. We have listened to survivors and we will continue to do so. Today's announcement is a reflection of this," Archbishop Hart added.
The new cap falls short of the £119,000 ($200,000) maximum payment recommended by the Royal Commission into Institutional Responses to Child Sexual Abuse.