The events surrounding the horrific death of the two-year-old girl are emerging as investigators begin looking into how the fire started about 1.30am.

Two adults and five children, aged two to 17, were inside the Austral Street two storey house when the blaze erupted.

The two adults, a 51-year-old woman and her ill partner,

were able get four of the children safely outside.

But despite frantic efforts by the woman, her two-year-old granddaughter died in the fire.

Firefighters said the blaze was so fierce their rescue efforts were rebuffed three times.

"We attempted to gain entry but the intensity of the fire prevented us," said Hunter Superintendent Greg Adams.

"Firefighters and NSW police are still investigating."

Neighbours said the flames quickly engulfed the front of

the house.

Firefighters were unable to save the home but later found the family dog alive among the wreckage.

One neighbour described the fire as a "tragedy".

"It's terrible, it's a terrible time for the family and they are all in a lot of pain," a family friend said.

"It's been a really terrible year for the family."

The dead girl and two of her siblings were staying at their grandparents house while their parents were away. Two other teenagers, believed to be the children of the couple living in the house, were also inside.

The grandmother suffered minor burns to her arms and smoke inhalation and was taken to John Hunter Hospital.

Despite the best efforts of firefighters they were unable to get to the trapped girl.

The fire took about 45 minutes to be fully extinguished and the home was destroyed.