Emergency services were called to Harper Way at Ingleburn about 2.40am to find the home ablaze.
Fire crews managed to extinguish the blaze but the two-storey townhouse was completely destroyed.
A crime scene has been established and an investigation is under way.
Police believe the blaze to be suspicious.
There were no reports of injuries.
Anyone with information about the fire, or dashcam or CCTV from the area is urged to contact Crime Stoppers on 1800 333 000.
