Croft Alley is a narrow lane that leads south from the end of Paynes Place, which in turn runs off Little Bourke Street in Chinatown between Russell and Exhibition streets. Paynes Place, previously Commercial Lane, extended as far south as Bourke Street in 1895, and Croft Alley offered rear access to the residences of Commercial Lane and Market Lane. It also serviced the Gallery Hotel on Bourke Street, via an east-west access laneway that reconnected Croft Alley to Commercial Lane and to Brien Lane, Coverlid Place and Golden Fleece Alley.
By 2008, Payne's Place had been shortened by the cinema on Bourke Street, and it now leads directly into Croft Alley, which has become a dead-end. Illustrating a peculiarity of Melbourne's bar scene, three wooden benches now protrude from the southern end of Croft Alley, providing seating to those waiting in line to enter The Croft Institute, the alley's fashionable laboratory-themed bar. The rest of the alley is non-descript; filled with garbage bins, crates and stagnant pools. However, in 2003, Croft Alley also hosted a City of Melbourne Laneways Commission called 'By Lanes'. Dylan Volkhardt's creation projected life-sized images of lane dwellers onto the walls of Croft Alley.