The blaze erupted at the modern townhouse at Chadstone in Melbourne's southeast on Wednesday night.
About 30 firefighters arrived at the scene to find flames burning through the roof of the two-storey home.
Neighbours informed rescuers that four residents were unaccounted for inside the home, Fire Rescue Victoria Commander Paul Eckholdt said.
"It was a difficult rescue," he told ABC Radio Melbourne.
Firefighters with breathing apparatus forced entry to the smoke-filled home, finding two primary school-aged girls and a 37-year-old woman unconscious in an upstairs bedroom.
"They were carried out and taken out to the front where Ambulance Victoria paramedics and firefighters were waiting," Cmdr Eckholdt said.
"They did have some burns, and they also had some airway burns as well."
The girls were rushed to the Royal Children's Hospital and the mother taken to the Alfred.
All three remain in a critical condition on Thursday afternoon.
The fire is being treated as suspicious, with investigators and an arson chemist arriving at the scene on Thursday morning.
Police spoke with a 36-year-old man who also lives at the home but he has not been arrested and is not being treated as a suspect.
"He certainly wasn't at the premises last night," Detective Inspector Chris Murray told reporters.
Police said an explosion caused by a gas cylinder inside rocked the home, where the family have lived for the past three years.
"They've been caught up in an instantaneous explosion and subsequent fire," Det Insp Murray said.
"It's going to catch anyone by surprise."
Neighbour Tom Walter said flashing lights and sirens drew him to his window, where he saw a "large fireball" sending smoke kilometres into the air.
"We had to close up all the windows ... It was crazy," he said.
"I didn't see anyone from my perspective inside at all but it would have been horrifying."
Another neighbour, who did not want to be named, said the couple and their two daughters were friendly but kept to themselves.
She expressed shock at what had occurred on a normally quiet suburban street.
The home, one of two on the block, remains taped off.
The fire destroyed its upper floor bedrooms and ensuite, and penetrated the roof causing a partial structural collapse.
The rest of property has smoke and water damage.
The tragedy reinforced the unpredictable and devastating nature of fires, Det Insp Murray said.
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