Firefighters were called to the 1900 block of Edgewood Drive, near Greer Road, shortly after 2 p.m.
They arrived to find the home, an Eichler, engulfed in flames, said Palo Alto fire spokeswoman Barbara Cimino.
"They were able to contain it rather rapidly," Cimino said. She said work was under way on the home today when the fire started and that one worker had suffered injuries to his arm. He was taken to a hospital.
Cimino said the homeowners were living elsewhere during the renovation.
She did not know whether the home was destroyed but said it was "significantly damaged."
Cimino said the cause of the fire remains under investigation.
