On Thursday night, the family, from Plumpton, in north-west Melbourne, lit a fire in the open fireplace which spread, engulfing the home.

Firefighters who raced to the house heard the 35-year-old mother screaming for help as her four-year-old son was missing in the flames, according to a witness.

She was flown to The Alfred hospital from Canberra in a critical condition on Friday night.

The body of the child was found in the burnt ruins of the house at Anglers Reach, north-west of Cooma, early on Friday morning, police said.

The family of six had just arrived in the small town, about 40 kilometres from the Selwyn snowfields and on the shore of Lake Eucumbene, when they tried to light the fire, a NSW Police spokesman said.

"The fire was eventually lit but spread throughout the building," the spokesman said.

While the rest of the family escaped from the timber holiday house on Illawong Road, the little boy could not be found on Thursday night.

When the damaged house was stable enough for firefighters and police to enter on Friday morning, they found his body.

The mother was flown to hospital in Canberra with serious burns to her face and upper body. The boy's father, aged 40, and three siblings were not injured, police said.

Tania and David Young, who own the nearby Anglers Reach Lakeside Village and are on the local fire brigade, received a call about 7pm on Thursday to say a house was on fire.

Mrs Young said that when her husband, who is the fire captain, arrived minutes later, the house was burning so intensely that there was nothing firefighters could do.

"He was first on the scene, and all he could hear was [the mother's] screams," Mrs Young said. "It was a timber home, and it was gone in no time.

"To lose anyone in a fire is horrendous, but to know there's a little child lost is just awful."

Mrs Young said most houses in Anglers Reach were holiday homes, which were popular with young families heading to the Selwyn snowfields.

She said a neighbour had raised the alarm about 7pm on Thursday.

"When I looked outside you could see the glow. It pretty much went up," she said.

"It comes down to containment in the end; you can't do anything about it."

Snowy River Shire mayor John Cahill said the family was believed to be on a holiday to the snowfields with two other families, also from Victoria, when the tragedy occurred.

"It's a terrible thing," he said. "It has absolutely shattered the community, including the people who fought the fire. They would also be suffering terribly.

"My heartfelt feelings go out to the families involved. It's a shocking thing. We seem to have spates of these fires during the cold winter months."

An investigation into the cause of the fire is under way, and a report will be prepared for the coroner.