Children were rushed off the stage at the Sidney Myer Music Bowl as the two protesters ran across it waving Palestine flags about 8pm.
A 21-year-old woman from Brunswick was arrested, and police moved on a second person following the Christmas Eve demonstration.
Victoria Police said the Brunswick woman had been issued with an infringement notice for possession of a controlled weapon. Police did not provide details on the type of weapon the woman had allegedly taken to the carols.
After both were removed, Campbell appealed for calm and assured people the children about to perform were safe.
“They’re allowed to have their moment, they’re allowed to have their time in the sun, but we did have kids here, so we wanted to make sure those kids are safe, they’re gonna be back out in a second,” Campbell said as he attempted to reassure the crowd.
“It’s a very hard time in this world, it’s a hard time for us all to come together on a night like this when there’s a lot of pain out there. We’re going to just settle things down for a moment, and we’re all going to be fine.”
Prime Minister Anthony Albanese called for a harmonious Christmas following the demonstration, telling reporters at a lunch in Sydney on Monday the holiday was a time for all people to come together.
“I have a very firm view that Australia’s social cohesion is absolutely critical and we need to bear that in mind in all of our actions,” he said.
“This is a time in which we come together as a nation … where people have come, from different faiths, from different parts of the world to make Australia their home,” Albanese said.
“It’s important that be cherished and nourished and that we don’t seek to divide.”
Paul Kelly, G Flip and Casey Donovan were among the performers who lit up the stage for the annual Christmas concert on Sunday night.
The event raises money for Vision Australia’s children’s services, with all proceeds supporting families and children who are blind or have low vision.
Carols by Candlelight, which is broadcast live by Channel Nine, the owner of this masthead, has been held on Christmas Eve in Melbourne since 1938.with AAP