NSW Police said remains were found when the house was able to be searched on Monday morning, after firefighters extinguished the blaze.
Emergency services were called about 2.10am on Monday after a house caught alight in the small town of Bowen Mountain, in the foothills of the Blue Mountains in NSW.
Five people managed to escape the blaze but two had been unaccounted for, police said.
The two missing people were believed to be young children, firefighters told the Today Show.
About 60 firefighters from Fire and Rescue and the Rural Fire Service were needed to bring the blaze under control about 3.30am, but many were forced to withdraw before the roof caved in, Nine reported.
"There are parts of the home that are still hot and smouldering and many parts of the home have collapsed," RFS Commissioner Trent Curtin told Today.
"Firefighters are moving into the home with hose lines to gain access to the areas where they can search for the unaccounted-for people."
NSW Ambulance confirmed four people were taken to Nepean Hospital for smoke inhalation and minor injuries.
The four included a man aged in his 30s, a teenage male and two primary school-aged boys.
Officers have established a crime scene at the home.
An investigation into the cause of the fire and formal identification of the two bodies has also commenced, NSW Police said in a statement.
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