The report, produced by competition regulator the Australian Competition and Consumer Commission, also shows that Brisbane is third with 1.2 million TEU. Fremantle in Western Australia handled 700,000 TEU and Adelaide processed 400,000 container units.
Sydney lost the top spot to Melbourne in 2015-16 but the turnaround is seen as being due to the restrictions on vessel sizes that are able to use the Port of Melbourne, according to Fareham, Hampshire's Port Strategy.
Chairman of stevedoring company Patrick, Maurice James said the figures reflect Melbourne's inability to take larger vessels and this underlines why more work needs to be done to ensure larger vessels can access Swanson Dock.
Port of Melbourne chief executive Brendan Bourke has promised to work closely with stakeholders to "affirm its position as Australia's most important maritime trade hub".