Emergency services were called to a townhouse on Ann Street just before 8:00am where a second-storey bedroom was ablaze.
Detective Senior Constable Benjamin Gordon said a family of seven were home at the time.
He said the child’s uncle, who is in his 20s, tried to save the boy.
“He’s noticed some smoke and he’s gone to the bedroom where the fire was and he’s been able to rescue the one-year-old from a cot that was just next to the door,” Detective Senior Constable Gordon said.
“Unfortunately due to the extend of the fire and the smoke he hasn’t been able to get any further into the bedroom to rescue the other [four-year-old] child.
“Understandably there’s an overwhelming reaction by [the family] of grief, they are distraught at this point.”
Detective Senior Constable Gordon said the one-year-old child was treated for non life-threatening burns.
Dandenong Fire Brigade station officer Darren Padgett said fire crews broke through a top floor window to search for the child.
“No one wants to see a child fatally, so it’s pretty distressing,” he said.
Mr Padgett said one firefighter fell through a floor during the search and was transported to hospital with minor injuries.
A crime scene has been set up to establish the cause of the blaze and fire investigators are on the scene. The house was extensively damaged in the fire.