A garbage contractor made the grisly discovery about 9am on Monday at Bellerive in Hobart, initially believing it was a mannequin.
The 45-year-old's death could have been caused by foul play or misadventure, or both, Tasmania Police believe.
"The garbage contractor attended the business premises as he would normally do," Detective Inspector David Gill said.
"He has lifted the lids on a number of large bins and found the male … deceased."
The man, whose name has not been made public, was known to police and had been homeless for a couple of months.
Det Insp Gill did not confirm whether the man had been sleeping in the bin, which is behind a hairdresser's and Salvation Army store.
He was last seen alive by his children on Saturday night and there were "no issues" with the visit, Det Insp Gill said.
"We're trying to close the timeline as we're continuing the investigation," he said.
There was no evidence that the man suffered any injuries.
An autopsy will be conducted on Tuesday, while police will review CCTV as part of their investigation.
The area at the back of the shops is known to be frequented by people sleeping rough, Det Insp Gill said.
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