The fire started in the roof space of a house in Stone Drive, blowing out first storey windows and burning away much of the roof.
It was reported just before 1am.
Residents said they heard loud voices and crackling before seeing people gathered in the street. One said the house "just lit up".
The fire also spread to the adjoining house which suffered minor damage.
Four fire engines from Albrighton, Telford, Wellington and Shrewsbury attended and the crews used six lots of breathing apparatus and two jets to fight the blaze.
West Midlands Ambulance Service also attended.
This morning West Mercia Police cordoned off the two houses with police tape while the source of the fire was investigated.
Ian Leigh, an investigator with the Shropshire Fire & Rescue Service, was at the scene at about 9.30am. He said: "We are working with West Mercia Police to continue the investigation. We are not ruling anything out."
Residents who were at home at the time reported hearing loud voices before seeing people gathered in the street.
The house in Stone Drive is separated by a fence from several houses in Hough Way.
One woman who lives at Hough Way with her children said she heard shouting and looked out of her window to see someone trying to climb the fence.
The woman, who did not wish to be named, said: "I smelled burning. I ran downstairs and opened the door, it was on fire. I could hear the crackling.
"I grabbed the kids, we moved both the cars – I thought it was going to blow. I was driving barefoot.
"As we drove away the flames started. We saw the orange.
"I thought 'that's going to blow up our house' but it didn't luckily.
"I could hear the crackling and the fire, I can still hear it."
The house is in a part of Stone Drive that was built in the Scarlett Oaks Taylor Wimpey Development.