Emergency services were called to the fire at a home on Chapel Street at St Kilda about 8.40pm on Wednesday.
Firefighters found the man critically injured inside the home but the 60-year-old died at the scene.
Detectives executed a search warrant at a property in St Kilda on Thursday, arresting a 30-year-old man.
He has been interviewed and released pending further enquiries.
Police said the investigation remains ongoing and are urging anyone with information to come forward.
