The large fire, which is believed to be suspicious, caused “significant” damage to a double-storey house on Rhodes Parade in Pascoe Vale about 4.30am.
A man in his 60s, who managed to flee the house, was treated at the scene for serious burns before being taken to the Alfred Hospital in a serious condition.
A woman, who is known to the man, escaped without injury.
Police said they were initially alerted to the incident after reports of a man smashing a window at the unit, before receiving reports of a fire.
Fire Rescue Victoria (FRV) Commander Craig Williams said crews contained the fire to one unit and it was brought under control within 20 minutes.
“FRV crews were on scene quickly and this was an extensive fire, it took some time to extinguish… bringing significant damage,” he said.
Peter Olivieri, who lives near the property, said he heard a “loud bang” which woke him up about 4am.
“Within minutes I heard sirens and walked out and could see the flames,” he said.
“It was violent, the flames were really high.
“I have never seen a house fire like it.”
Police and fire crews remain on the scene and investigations are continuing.