Mortlake police Acting Sergeant Paul McLean said the occupants returned to their property, located between Eight Mile Lane and Six Mile Lane on the Hamilton Highway, at 9.20pm on Sunday.

He said they turned on a number of electrical heaters and a wood fire.

"The occupants have then put their young kids to bed and began watching TV," Sergeant McLean said.

"When the fire alarm went off they went to investigate. They have opened the closed door to the main bedroom to find the room fully engulfed in fire.

"The occupants have grabbed the two young kids (aged under four) out of bed and evacuated the house. No one was injured but unfortunately the only thing left is the clothes they were wearing.

"Numerous CFA units attended the scene. Mortlake SES provided lighting. Unfortunately, despite valiant efforts, the house could not be saved and it was totally destroyed.

"It appears to be some sort of electrical fault and is not being treated as suspicious."

CFA district five incident controller Richard Bourke said 10 units responded to the blaze, including two from Mortlake.

He said the Moyne Shire water tanker also attended due to a lack of water supply in the area.

He said brigades left the scene about 4am.

Mr Bourke said he could not emphasise enough the importance of working smoke alarms.

"The family were alerted by the smoke alarms in the house and that was how they were able to escape unharmed," he said.

Sergeant McLean said assistance was being requested to help the young family move forward.

"Unfortunately we now have a family with absolutely nothing left and we will be requesting any help that the community can provide to assist them in moving forward and rebuilding," he said.

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