No-one was inside the house at the time.
Palmerston Chief Fire Officer Geoff Davis said the house was extensively damaged by the fire, which was believed to have started in the kitchen.
He praised the work of the volunteer firefighters who worked to save the house, and the local community who rallied around to support the young family affected by the fire.
An Invercargill fire safety officer would examine the scene to determine the cause of the fire.
Volunteer firefighters spent several hours fighting a large hay barn fire near Balclutha yesterday.
A Coe Rd hay barn with hundreds of bales was well alight when Balclutha and Milton firefighters arrived shortly before 8am.
A Fire Communications spokesman said Waihola Rural Fire also attended the blaze, which was extinguished by 10.30am.
