Police said they were treating the device as live until they knew otherwise.
"It's a very serious incident where the life of a young lady is potentially at risk and we're dealing with it in that light," assistant commisioner Mark Murdoch told media at the scene.
He said the teenager, who was alone in the house at the time of the attack, was doing a "great job" keeping her emotions in check.
© Brendan EspositoPolice and bomb squad at the Mosman house
"They're probably doing a little bit tougher than she is. They're caring, loving parents and they're obviously concerned about their daughter. They're holding up okay but as you would expect they're doing it pretty rough," Mr Murdoch said.
Four police are inside the house with the girl - police negotiators and bomb disposal experts. When asked if police had had contact with anyone claiming to have left the device, Mr Murdoch replied ''no''.
© Ben RushtonPolice and bomb squad at the Mosman house
The investigation is being led by the State Crime Command's robbery and serious crime squad, which deals with extortion amongst other crime.
Earlier police said they were not treating the case as self-harm.
© Ben Rushton Police and bomb squad at the Mosman house
''There are operational reasons for playing our cards pretty close to our chest,'' he said.
''The young lady is fine and doing her best to assist the police to find out exactly what's gone on.''
The drama started when the girl phoned police about 2.30pm.
Police have cordoned off the house and closed several nearby streets. Some homes have also been evacuated and police are urging people to stay away from the area.
Police are appealing for help and anyone who noticed suspicious activity around the home or on Burrawong Avenue this afternoon should contact Crime Stoppers on 1800 333 000.
The area is one of the wealthiest in Sydney where multi-million dollar properties include one belonging to horse trainer Gai Waterhouse.
with AAP
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Apparently the police were impressed enough with the 'look' of the device to treat it as a serious threat, even though it was later discovered not to be an explosive. And it took them a little while to work that out.
You'd have to have some sort of specialised knowledge to make it look real... and to know that the person it was attached to was going to be alone in the house at the time. Bet you there's a military connection in there somewhere.