Albury Police Inspector Kim Sorensen says the Nail Can Hill forest fire was not sparked from a deliberately lit car, as reported by the RFS.
He said the fire started elsewhere and was "more likely" to be careless than malicious.
"There was no intent to start a bush fire," Inspector Sorensen said.
"The fire then engulfed the car and got out of control."
He said a suspect was in custody helping police with their inquiries.
The fire at Nail Can Hill in Albury's west has been bought under control after burning though 20 hectares of bush.
Albury RFS Inspector Marg Wehner confirmed a deliberately lit car sparked the fire.
A chopper working on the eastern front has extinguished fire burning towards Ridge Trail in the east.
Low wind speeds have allowed the blaze to be contained between Warrenlea Trail, Jacaranda Trail and Ridge Trail to the north.
Properties to the south along Jacaranda Trail continue to be protected against ember attack.
Ms Wehner warned residents and on-lookers to stay away from the area as damaged trees were falling unpredictably.
She said the fire would need to be patrolled for several days as burning timber in the area could reignite with continued hot and dry weather conditions.
A WATER bombing helicopter is being sent in, in a bid to stop the spread of a fire at Nail Can Hill.
Eleven Rural Fire Service tankers and three Fire and Rescue NSW trucks are at the blaze on the west side of the hill, near Jacaranda Street.
Firefighters have been working for almost two hours to get the fire under control.
There is no threat to homes.
It is understood a car was found alight nearby, but crews have yet to determine if this sparked the larger blaze.
Albury RFS deputy group captain Brian Millar said the car fire had been extinguished and crews were now focusing on stopping the spread of flames.
Mr Millar said a Firebird helicopter had been called in
"The helicopter will waterbomb along the hill to stop the spread of the fire over the hill," he said.
"Ground crews will then go in to try and black the fire out."
Mr Millar said there would be an investigation into the cause of the blaze, and whether the car fire was to blame.
Police are also on the scene investigating.
It is understood at this stage that the car was not stolen, nor deliberately set alight.
FIREFIGHTERS are at the scene of a fire at Nail Can Hill near Jacaranda Street in West Albury.
A burnt out car is suspected of starting the blaze, which was called in about 2.50pm.
Crews are describing the blaze as “well alight”.
Police are also making their way to the scene, but it is believed the car was not stolen.
More to come.