Once it was extinguished, firefighters discovered the body and contacted police.
Arson investigators are expected to examine the scene later today.
Police said the body was yet to be formally identified.
Police said while they were at the scene, a man was assaulted and taken to hospital with minor injuries.
A 49-year-old Mordialloc man was arrested and also taken to hospital with minor injuries.
He will be interviewed at a later date.