Balclutha and Kaitangata volunteer firefighters were called to Charlotte St shortly before 9.45pm, to find a three-bedroom weatherboard house ablaze.
Acting Balclutha Volunteer Fire Brigade Chief Fire Officer Terry Michie said it took about 15 minutes to get the fire under control.
One room was undamaged, apart from the ceiling, but most of the rented house was gutted.
There were at least four people in the house at the time of the fire, and two young men were treated for smoke inhalation.
Mr Michie said it appeared the blaze was caused by a clothes horse placed too close to a heater.
Terry Clearie said her son Adam was asleep in bed and woke to find his bed in flames.
''He said in less than five minutes everything was gone ... We're just relieved that everyone is OK.''
She said her son lost everything in the blaze, and did not have insurance.
''He has no phone, clothes ... nothing.''
Ms Clearie welcomed any donations of furniture or clothing to help get Adam and his flatmates ''back on their feet''. They can be dropped off at the Salvation Army in Balclutha or call (03) 418-4470.
Mr Michie said people need to remember the ''one-metre rule.''
The rule, also called the ''heater metre'' rule, is that furniture, clothes and curtains should be at least one metre away from heaters and fireplaces.
Mr Michie said it was also a reminder of how important it was to have working smoke alarms in a house.
