Fire services got the callout to the house at 559 Glenorchy-Paradise Road at 12.06pm.
Volunteer firefighters from the Glenorchy Rural Fire Brigade attended the fire, followed by two fire engines from Queenstown.
"Unfortunately the house could not be saved. The interior was completely destroyed, and part of the roof gave in. The house will probably have to be torn down," senior firefighter Tom McGeoch said.
It was not clear what had caused the fire, but Mr McGeoch said Fire Safety would be investigating the cause.
The house is owned by a Glenorchy-based couple, but currently rented out.
One of the tenants was present, and reports from the scene indicate he was devastated by the incident.
Fire services in the Wakatipu area had a busy day on Friday, starting with a callout for a car accident at Glenda Dr before 8am, attended by the Frankton and Queenstown fire services.
This was followed by two minor scrub fires at Malaghans Rd just before noon, attended by Frankton and Arrowtown crews.
Queenstown fire services had further calls for alarms, without actual fires, at Hamilton Rd at 10am and Stanley St shortly after 5pm.
Mr McGeoch said Queenstown Volunteer Fire Brigade had enough people available to respond to all callouts during the day.
The Otago Daily Times understands there were initially not enough volunteers available at Glenorchy to respond to the house fire.
Principal rural fire chief Gordon Bailey from Queenstown Lakes District Council said it was the nature of having a volunteer fire service.
"Glenorchy is a small community, covering a large area. Since the firefighters are all volunteers, they may not all be readily available when the alarm goes off."
The rural fire service in Glenorchy is mainly equipped for vegetation fires, with Queenstown as a back up in the event of a structure fire.
