Zhang Jimin, a 46-year-old father of two, died as local authorities sought to demolish villagers' houses in Pingyi county, in the eastern province of Shandong.
The land was to be used for a residential development but Zhang refused to move partly because he would not be able to afford a flat, the Beijing News said.
Authorities were offering compensation of 60 yuan (USD 9.4) per square meter for land, while the apartments were selling for 1,100 yuan per square meter of floor space.
The house was soon ablaze and the fire lasted less than an hour, it said.
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"(Zhang's body) was curled and reduced to the size of a bag. You can hardly tell it was a human body," Kong Qingzhen, a villager, was quoted as saying.
The county government first vowed to "seriously punish" anyone who "spread rumours" about the death, then said Wednesday that Zhang had burned himself to death and "arson by others was ruled out", on the grounds that he had bought petrol in the previous days.
Investigators from Linyi city, which oversees Pingyi, announced that several local officeholders had been put under criminal detention, China's official Xinhua news agency reported late yesterday.
"This is a vicious incident severely infringing the people's (rights to) life and assets," Xinhua cited an official statement as saying, adding it was due to "grassroots officials' weak conception of the law and discipline and their simple and brutal working style".
Violent land seizures and forced evictions of villagers by local officials to make way for development have become a major source of social resentment in China in recent years, sometimes triggering unrest.