The body of missing mother-of-two Karen Chetcuti has been found at Lake Buffalo.

The 49-year-old disappeared from the small Victorian town of Whorouly on Tuesday night.

A friend reported her missing the following day after she failed to turn up to work.

On Thursday the mother's burnt out car was found 20 kilometres away from her home.

Ms Chetcti's neighbour Michael Cardamone, 48, has been arrested and is currently being questioned by police.