Police investigate 'bizarre' death of elderly lady - and mystery woman's appearance

Police are investigating the bizarre circumstances surrounding the death of an elderly woman near Bendigo.

Seven News understands an 81-year-old female resident had been dead inside since before Christmas, so after at least four months she was badly decomposed.

Seven News understands an 81-year-old female resident has been dead inside the house since before Christmas. Picture: 7 News

However, neighbours say another woman has been at the house, putting the bins out and walking the dog.

Police believe that person has been living here since the elderly woman died.

One neighbour said a woman was taken away by detectives on Thursday.

The property is near Bendigo in Victoria. Picture: Google Maps

Police confirmed they took a statement from a woman at Bendigo police station but she has been released without charge at this stage.

Officers are now preparing a report for the coroner.