Police have arrested a 32-year-old man, who lives at the home and charged him with sypplying prohibited drugs.

He was refused bail and will appear in Liverpool Local Court today.

Officers are now investigating the scene to see if there was a drug laboratory on the premises.

The fire, which started in the granny flat of a Stansmore place property about 1.30pm yesterday caused significant internal structural damage.

During their investigations of the suspicious fire, police found a bag containing the drugs.

Police said the drugs would have an estimated street value of $1 million.

They said they also seized small amounts of other drugs and a large quantity of cash.

Chief Inspector Andy Richmond said the property may have been used to make the drugs, but it is unclear due to the damage caused by the fire.

Anyone with any information can call Liverpool Police, 9821 8444 or Crime Stoppers 1800 333 000.