Seven of the victims are believed to be the children of a 34-year-old woman also found suffering from stab wounds to the chest inside the property in Manoora, Cairns, Australia.
The eighth child is believed to be one of her relatives.
The woman is currently receiving treatment for her injuries and was said to be in a stable condition in hospital.
Queensland state police said they were called to the home in the Cairns suburb of Manoora on Friday morning after receiving a report of a woman with serious injuries.
When they got to the house, they found the bodies of the children inside, ranging in age from 18 months to 15 years.
Detective Inspector Bruno Asnicar declined to say how the children died.
He said: "As it stands at the moment, there's no need for the public to be concerned about this other than the fact that it's a tragic, tragic event.
"The situation is well controlled at the moment.
"There shouldn't be any concern for anyone else out of this environment."
He added that officials had not yet identified any suspects, but were talking to a range of people.
Acting Chief Superintendent Russell Miller said officials believe it was an isolated incident and there was no threat to the rest of the community.
Lisa Thaiday, who said she was the injured woman's cousin, said one of the woman's other sons, a 20-year-old, came home and found his brothers and sisters dead inside the house.
She said: "I'm going to see him now, he needs comforting.
"We're a big family... I just can't believe it. We just found out (about) those poor babies."
The street has been cordoned off and a crime scene will remain in place for at least the next day.
Dozens of police descended on the home, and crowds of locals stood outside the police barricades, some of them wiping away tears.
Ansicar said: "These events are extremely distressing for everyone of course and police officers aren't immune from that - we're human beings as well."
The tragedy comes as Australia is still reeling from the shock of a deadly siege in a Sydney cafe earlier this week.
On Monday, a gunman burst into a cafe in the heart of the city and took 18 people inside hostage. Two hostages were killed along with the gunman after police stormed in 16 hours later in a bid to end the siege.
Referring to both incidents, Australian Prime Minister Tony Abbott said: "The news out of Cairns is heartbreaking.
"All parents would feel a gut-wrenching sadness at what has happened.
"This is an unspeakable crime. These are trying days for our country."
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