Smith Street is an amazing place for finding good restaurants in cool locations.
Me, as Italian, I am quite surprised about the culinary level I have been encountering in this area. The restaurant that deserve the best mention in Fitzroy is Gigi Baba.
Long bar desk to sit, among few tables in and out. You better reserve, if you don't want to wait too long. Service is precise yet casual.
Food is delicious, menu is short enough to ensure proper attention to selected ingredients.
The well respected chef is Ismail Tosun (Eminem in Perth).
He proposes prawns wrapped with thin strips of eggplant, capsicum butter sauce, butter-soft confit-cooked salmon splashed with yoghurt, black-eye peas and a little twist of spices, etc.
Maybe too expensive, but really good.