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Fenech told The Daily Telegraph that boxing had suffered enough deaths recently and he feared for Mundine after his performance in the recent loss to American Charles Hatley.
"Why would anyone want Anthony to get hurt, seriously hurt?" Fenech said.
"The sport here has already had a couple of tragic deaths this year, it doesn’t need any more.
"It’s a bullshit fight and if there’s a boxing authority anywhere in Australia who lets it happen, we might as well ban the sport here forever.
"Everyone saw what happened to Anthony last fight - if Danny doesn’t finish him in the first round, he isn’t trying."
The proposed fight is set to be in May 2016 and is expected to draw a revenue figure of $20 million.
But Fenech believes Mundine should hang up the gloves before a rematch is organised.
"Anthony has lost his speed, his durability; everyone saw what happened last fight - he's shot," he said.
"No disrespect to him, Choc had a go and accepted his loss. But he couldn’t beat a guy nobody knew.
"Back in their primes, Anthony won fair and square.
"To be honest, I still can’t believe Danny lost — he used the wrong trainers and fought the wrong fight."