Two “sweet” girls have died and their baby sister is in hospital after an electric bar heater caught fire in the bedroom of a Geelong home.

The toddlers’ parents woke just after 8am on Thursday to the smell of smoke in their Loch Street, East Geelong home.

It’s early in the investigation but Detective Senior Sergeant Mark Guthrie says it appears a toy fell on the heater in the front room where the older girls, aged two and three, were sleeping.

It’s not known how long the fire was smouldering before it was discovered.

It’s believed the girls died from smoke inhalation.

A neighbour told AAP she believed the father had rushed to the home of a neighbour, a doctor, for assistance before the couple drove their family to hospital where the girls were pronounced dead.

The family’s six-month-old daughter who was in another room with her parents is being treated for smoke inhalation.

Neither parent was injured.

“As you can well understand, the set of circumstances that has occurred, they’re very traumatised and they’re at the hospital at present,” Det Sen Sgt Guthrie said.

He earlier described it as tragic.

The neighbour said she knew the family to say hello to and the sweet girls would stop on their way past to pat her dog.

“They were smitten,” she said of the parents, who have lived in the street for three or four years.

“You could see in their eyes they really loved their children.”

Detectives have reduced the cordon around the white clad home.

Gathered investigators and a strand of police tape across the low brick fence are the only sign of the incident.

Detectives and arson investigators have been at the scene through the morning and will prepare a report for the coroner.