A 32-year-old man was arrested at the scene and taken to Burwood Police Station, before being taken to hospital for an assessment.
He remains at the hospital under police guard.
Police set up a crime scene at the Kembla Street house after the body was found and began a homicide investigation.
“What I can say is this is a gruesome crime,” McDonald, Burwood’s Police Area Commander, told reporters yesterday.
“The man’s injuries are horrific.
“And what we know from very preliminary investigations is that this, we believe this is a drug deal gone horribly wrong.”
McDonald said she didn’t believe the pair were related and it was unclear if they knew each other.
She also couldn’t say whose house it was or who else was there at the time.
Strike force detectives are now hoping to speak with a man who was last seen on Kembla Street on Monday afternoon.
He is described as being of Asian appearance, with a solid build and was last seen wearing black jumper with red symbols on the back, blue jeans, black shoes, a black hat and carrying a black satchel.