Just after 4am, emergency services were called to Irrara Street, Croydon, after reports of a fire.
Crews extinguished the blaze, which badly damaged the home and caused the roof to collapse.
The body of a man believed to be in his 80s was found inside.
Investigators said the cause of the fire was unknown, but it is being treated as suspicious.
It was earlier reported that another person at the home remained unaccounted for as firefighters searched the property.
Police are appealing to the public to find 50-year-old Christopher Grantham, who lived at the home.
Detectives are investigating under Strike Force Leverier.
Grantham is described as being of Caucasian appearance, of large build, about 190cm tall, with short, brown hair, a short beard and moustache.
He was last seen wearing a navy blue ‘New York Yankees’ hoodie, blue denim jeans, a black New York Yankees hat, with a wristband on his right arm.
Police believe he was last in the Leichhardt area about 6.30am.
Detectives believe he could be using public transport to travel through the Inner West, Circular Quay, Watsons Bay or the surrounding areas.
Anyone who sees him is advised not to approach him, and instead call triple zero immediately.
Police Superintendent Christine McDonald said the blaze was “certainly not gang-related” and was not at this stage linked to any other fires.
McDonald said an “elderly” woman was also assisting police with inquiries.
She said all three parties – the woman, the 80-year-old man, and the 50-year-old man – appeared to be related.
She also confirmed the 50-year-old was known to police.
The woman is understood to have been at the house last night, but left at about 1am.
McDonald said police were not called to the home before the fire broke out.