A heartbroken community is rallying around two families after a woman and two children died in a horrific house fire.

The bodies were discovered in the charred remains of a two storey Gladstone home in central Queensland that partially collapsed after being engulfed in flames early on Wednesday.

Gladstone Mayor Matt Burnett confirmed the victims were a woman and two children after meeting with some of the devastated relatives.

"There's two families involved here, and my heart breaks for them all," he told AAP.

"It's just a terrible time, particularly when children are involved.

"As you can understand the families are very distraught right now."

Emergency services were called to the Toolooa home at 5.56am.

"The house was fully engulfed," police said in a statement.

Multiple occupant

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