About 15 fire fighters attended the scene on Clemes Street on Thursday morning.
A CFA spokesperson said the fire investigation unit were still working at the property.
"Firefighters were able to save the house next door," they said.
"There was some fire extension to the house next door - they were able to save that which was really good.
"There was some asbestos involved so we will need to do some decontamination of firefighting equipment."
EARLIER, 11.30am: CFA personnel are on the scene of a serious house fire in Stawell.
Three fire trucks and multiple firefighters were working to control the fire on Clemes Street.
Emergency services were called to the scene just before 11 am.
An eyewitness said the house appeared to be completely destroyed.
Clemes Street was blocked off to traffic.
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