The children, all believed to be under five, were rescued from the blaze in Sydenham in Melbourne's northwest and rushed to the Royal Children's Hospital in critical conditions.
Victoria Police's arson and explosives squad is investigating what sparked the blaze, which occurred after a large bang was heard by local residents.
"The area has been cordoned off and a crime scene established," Victoria Police said in a statement.
"No one else was injured in the fire, with investigators working to determine if anyone else was present in the home at the time or just prior to the fire."
Detectives and an arson chemist were attending the scene on Monday morning.
Fire Rescue Victoria was called to the Sydenham address just after 9:30pm on Sunday to find smoke and flames billowing from the brick home's roof.
"Firefighters arrived on scene within six minutes to find a single storey brick dwelling fully involved," an FRV spokesman said in a statement.
"Crews wore breathing apparatus to tackle the blaze and conduct an internal search of the property."Â
The three children were rescued by firefighters and and given emergency care alongside paramedics before being taken to hospital.
Fire Rescue Victoria said the properties either side of the house were not affected but would be checked for smoke damage.
Power and gas companies have been requested to attend the site.
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