13/07/2017 9:26 AM AEST | Updated 13/07/2017 10:26 AM AEST

Police DNA Bungle Wrongly Cleared Suspects Of Maria James' Murder

The investigation hinged on a bloodied pillowcase from a different crime scene.

Victoria Police have admitted they're "extremely disappointed" by a major bungle which saw several key suspects ruled out of the brutal 1980 killing of Melbourne single mother Maria James.

The murder investigation hinged on a bloodied pillowcase, which was used to establish the DNA profile of the suspected killer, but on Wednesday the ABC's 'Trace' podcast revealed the pillowcase was from a completely different crime scene.

On Thursday, police announced they will now re-test all the evidence in the case and consider previously ruled-out suspects.

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Maria James was brutally stabbed to death inside her Melbourne home in June 1980. Her killer has never been found.

James was stabbed 68 times in her home out the back of her second-hand bookshop in the north Melbourne suburb of Thornbury in June 1980.

One key suspect was local paedophile priest Father Anthony Bongiorno, who was seen covered in blood just metres from the crime scene on the day of the murder.

In 2013, the victim's son Adam James, who has cerebral palsy and Tourette syndrome, revealed he was sexually abused by Bongiorno in the month leading up to his mother's murder, that he told his mother about the abuse and believed she was planning to confront the priest.

Father Bongiorno died in 2002 aged 67, and police eliminated him as a suspect in 2015.

But now they admit this determination was based on faulty DNA evidence.

Victoria Police deny the evidence swap was a cover-up, insisting it was an "isolated" case of human error.

Assistant Commissioner Steve Fontana said the error could have occurred decades ago. The evidence was located in a police storage unit in the Melbourne suburb of Collingwood.

"(The pillowcase) was stored adjacent to another exhibit, they were similar types of exhibits in both cases, and one ended up in the other," Fontana said.

"We've got tens of thousands of exhibits -- and Homicide particularly have got hundreds of thousands of exhibits... This is a human error in terms of how one exhibit ended up in the package of another -- and that would be very isolated."

The embarrassing admission comes more than two years after Victoria Police came under fire for destroying evidence in at least 40 cold cases during a 1994 relocation of evidence to the Collingwood site.

In 2014, The Age revealed that in at least one case -- the 1983 murder of teenager Michelle Buckingham -- that evidence could have proved vital as forensic science developed.

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A witness saw Father Anthony Bongiorno covered in blood near the James' home on the day of the murder.

The admission by Victoria Police has prompted James' two sons to formally apply to the Victorian coroner to re-open the 37-year-old case.

James' son Mark told the ABC he was "devastated" by the bungle.

"(Police) apologised to me for what's happened, and they apologised for previously being told that Father Bongiorno had been eliminated, whereas now they can confirm Bongiorno has not been eliminated through any type of DNA testing," he said.

"I acknowledge human error is a fact of life, but it seems a bit odd that somehow this pillowcase got put into mum's evidence lot."

The mistake also raises questions about the fate of the other unsolved investigation from which the misplaced pillowcase originated.

Fontana would not reveal the details of that case, except to say that it dated back "a lot further" than the James investigation.