The man, who suffered severe burns and lacerations to his face, hands and body, was in an induced coma at John Hunter Hospital last night.

Neighbours in Reservoir Road said yesterday the man was conscious after the device he was holding exploded about 6.30pm on Saturday.

"He had blood pouring out of his face, ears and stomach," a neighbour, who asked not to be identified, told The Herald.

"He was worried about his eyes because he couldn't see properly."

The neighbour said the "massive bang" shook his house.

Lake Macquarie Police Inspector Peter Walsh alleged the man was making the bomb near his garage when it exploded.

"The man was attempting to prepare a home-made explosive and it would appear the device ignited in his hand," Inspector Walsh alleged.

"He suffered very serious injuries and is on life support at John Hunter Hospital."

Doctors put the man into an induced coma yesterday. Inspector Walsh said he would probably be transported to a Sydney hospital serious burns unit.

The man's girlfriend and other family members, who were home when the bomb exploded, were unhurt.

Inspector Walsh said firework casings might have been used to make the bomb but police were investigating what other materials were used.

He warned the public that making bombs was illegal.

"More importantly, they can cause serious injury," he said.

A resident of Reservoir Road, who asked not to be identified, said the bomb "could have blown our houses up".

"It's a shame that he was injured, but he shouldn't have done it he could have hurt others," the neighbour said.

Another neighbour said it was not the first time that explosions had come from the house but Saturday's blast was "quite a shock".