An emergency services worker stumbled across the grisly find on a road at Warrnambool, some 225 kilometres (140 miles) from Melbourne in Victoria state on Monday.
It is not clear if the animal was dead or alive when its ears were removed.
"Police members are investigating what can only be described as a very troublesome and disgusting incident involving the mutilation of a koala," said Warrnambool Sergeant Pat Day.
"We certainly want to get to the bottom of it. There is no reason for anybody to treat an animal in this way, whether it be alive or dead."
Victoria Police said in a statement the incident followed a series of kangaroo and wallaby mutilations in the area. No further details were given.
In June a kangaroo was found shot dead, dressed in leopard-print, and tied to a chair holding a bottle of alcohol, also in Victoria state.
The much-loved koala has been under increasing threat across Australia in recent decades, particularly from habitat loss, disease, dog attacks and bushfires.
A 2012 national count placed total koala numbers at 330,000, though their tree-top habitat makes accurate assessment difficult.
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