The children were 2 and 3 years old, MPD said.
"I saw the fire and I smelled the smoke and I felt the heat from the fire," Neighbor Frances Brown said.
Brown called 911 when she stepped outside and saw the flames.
"It was just kind of heart stopping for a few minutes."
One adult male was also in the home. He is in the hospital in critical condition suffering from smoke inhalation.
MFD dispatch said the fire came in at 2:46 p.m. in the South Pointe Townhomes in the 1500 block of Dewees, and was out at around 3:15 p.m.