A still from an Animals Australia video shows the riderless horse jumping into a group of people.
Banna Strand had lost his rider early in the race and continued on his run.
He eventually veered left from the course and headed for the barrier, in place to prevent horses jumping from the confines of the race grounds.
However, Banna Strand cleared the barrier and landed among the crowd.
The crowd would not have seen him coming because of the height of the barrier.
Seven people were taken to Warrnambool Hospital.
Four have since been discharged with minor bruising.
A two-year-old girl suffered a fractured collarbone, while an 80-year-old woman is undergoing X-rays on her shoulder and hip. A 12-year-old girl is undergoing X-rays on her foot.
"A full investigation of the incident will be conducted by Racing Victoria, in conjunction with the Warrnambool Racing Club," Racing Victoria chief executive Rob Hines said.
Racing Minister Denis Napthine said he had also ordered an inquiry into the incident. He said he had asked Racing Victoria to report to him on existing safety measures and any recommendations to improve spectator safety.
The injuries overshadowed another controversy arising from the race - just two of eight starters finished the 5500-metre course.
During the race, two horses fell, two were brought down and a further two dislodged their riders.
Hines said all eight starters were subjected to a veterinary examination following the race and were passed fit.
All eight riders were uninjured.