The two-storey weatherboard mansion set on Dolphin Hill was ablaze about 6pm.

The niece of the house owners, who live in Melbourne, was staying at the mansion for the weekend on her own when the fire started.

She suffered smoke inhalation.

Eight fire brigades arrived at the fire to find it well alight.

Musk Fire Brigade captain Trevor Brown said the fire took two hours to extinguish.

He said 11 fire trucks attended the blaze, which destroyed most of the mansion's rooms.

It is believed the fire started because of an electrical fault in the living room.

Mr Brown said the owners had just bought the Musk property.

"It's a terrible loss to the owners," he said.

"In our area, it's the biggest house fire our brigade has gone to."

Mr Brown praised the firefighters for containing the fire in the hot weather conditions.

"Locals carted water for us which made it easier," he said.

Daylesford, Franklinford, Glenlyon, Hepburn Springs, Leonards Hill, Musk and Porcupine Ridge fire brigades attended the fire.

One of the former owners, who was responsible for the renovations and wished only to be known as Leanne, said she was saddened the historical building had been lost.

She said the renovations were completed about a year ago.

"It maintained its original hand-painted plaster ceilings while contemporary renovations were kept respective of the period," she said.

She said the prestigious building deserved to be returned to its former glory.

"It was a very historical building. It was saved from Lake Wendouree," she said.

The mansion was moved to Musk from Lake Wendouree in the late 1990s.