Two workers who dashed through ferocious flames to escape from a burning car wrecking yard in Sydney's south-west remain in a critical condition, as investigators try to determine what sparked the inferno.

A witness described how the men, aged 40 and 32, emerged naked from the car yard in Fitzpatrick Street, Revesby, on Wednesday afternoon after the blaze apparently burnt the clothes from their bodies.

"When it's happened, I saw the men come out, big men, come out, naked, burnt," the woman told Nine News.

"He was walking ... and the other man started to scream 'Call two ambulance'."

Fire and Rescue NSW Commissioner Greg Mullins said the men were believed to have been trying to move a gas cylinder when it exploded.

It was one of numerous explosions witnesses heard just before 4pm emanating from the car yard, which was engulfed in a fire so big the smoke plume extended more than 100 metres and could be seen from kilometres away.

The injured men were taken to a nearby business and put in a shower, before paramedics arrived and took them to Royal North Shore Hospital.

A hospital spokesman said on Thursday morning that the men were in a critical condition.

Firefighters remained at the car wrecking yard overnight, extinguishing hotspots as they flared up.

Asbestos was found at the site, and firefighters are working with the NSW Environment Protection Agency to clean it up.

At the height of the fire, flames spread to a neighbouring car works factory and a gymnasium.

Engineers will visit the site on Thursday to determine whether buildings surrounding the car wrecking yard are structurally sound.

Police have set up a crime scene at the car wrecking yard and police and firefighters are investigating the cause of the blaze.

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