Police arrived at the house at Rosemeadow, in Sydney's southwest, about 1.30am on Sunday after reports of a disturbance in the quiet cul-de-sac.
Officers found a 64-year-old man suffering serious head injuries at the property, along with the bodies of a 65-year-old woman in the main residence and a man in his 20s in a granny flat.
The injured man was taken to hospital but later died.
A man in his 30s, believed to be the son of the middle-aged couple and the brother of the dead 25-year-old, was arrested after arriving at the scene in a silver Subaru sedan about an hour later.
Police arrested the 32-year-old and he was taken to Campbelltown police station for questioning.
No charges have been laid.
While the extensive crime scene was still under investigation, Superintendent Grant Healey said police suspected more than one type of weapon may have been involved, potentially including a hammer.
"We think that there's a bladed weapon involved, as well as some type of weapon that can create a blunt-force injury," he told reporters.
"Blunt-force trauma is always horrendous for people to confront and any edge weapon attack is always horrendous to confront."
A third sibling, aged 30, was injured in the incident but he was able to contact police.
The man has since been released from hospital.
Numerous police, including forensic investigators, could still be seen coming and going from the property late on Sunday morning.
Supt Healey said the family were not well known to police and there had never been reports of a domestic violence-related incident involving the group.
"We know it's a family unit and we're trying to work our way through what happened in the evening," he said.
"This is a very tragic incident ... there was no way for us to predict this type of thing was going to occur."
A report will be prepared for the coroner.
1800 RESPECT (1800 737 732)
Lifeline 13 11 14
Men's Referral Service 1300 766 491
14°C