Eight Cairns children are dead and a woman is in hospital with injuries.
The children were aged between 18 months and 15 years. Several of the victims were stabbed, police have confirmed.
A 34-year-old woman is receiving treatment for serious injuries and is assisting police.
A crime scene has been set up at a home in Murray Street in Manoora, a suburb about four kilometres from the CBD of the North Queensland city of Cairns.
Detectives are searching through the home, which is believed to be used for community housing.
Police were called to the property about 11.20am, following reports of a woman with serious injuries.
They have now set up a a mobile centre at the scene, with officers from the Cairns Criminal Investigation Branch, Child Protection and Investigation Unit, Scenes of Crime and Scientific section at the scene.
Cairns Detective Inspector Bruno Asnicar said the incident was "extremely distressing", however he was unable to confirm the relationships between the victims.
When asked whether the woman in hospital was in police custody, he said: "No, not at all. She's assisting us with our inquiries at this stage."
"As it stands at the moment, there's no need for the public to be concerned about this other than that it's a tragic, tragic event. The situation is well controlled at the moment," he told reporters.
"There shouldn't be any concerns for anyone else out of this environment and as we progress further we'll be sharing the results of our investigation.
"The crime scene is being locked down. That includes, from me. Nobody goes in there until our forensic people are finished and, until we have done that, we're not going to be able to clearly establish any relationships.
"This is not a small job; we're not taking this lightly at all. We don't do that here in the Far North, This will be done to the nth degree and we will cover every angle before this is finished."
He said specialist police were being sent to Cairns from Brisbane.
Police are expected to provide an update to the investigation at 4.30pm local time.
Torres Strait Regional Council mayor Fred Gela told Sky News that the family do not want the victims publicly identified until every member of the family has been notified.
Cr Gela told the channel he was a personal relative of the family and they were well known right across the Torres Strait.
Sky News reported that Cr Gela asked the media to be respectful of customs surrounding the naming of deceased Torres Strait Islanders.
Flowers are being dropped off at the scene, while locals have planned a vigil at Cairns' Munro Martin Park at 6pm.
Prime Minister Tony Abbott issued a statement on Friday afternoon, describing the incident as "an unspeakable crime".
"All parents would feel a gut-wrenching sadness at what has happened," he said.
"These are trying days for our country. Tonight, there will be tears and prayers for these children."
Queensland Premier Campbell Newman said he was "saddened and shocked" by the tragedy, and that his thoughts were with the family and friends of the victims.
"I'm also aware of the impact this will have on the emergency service workers and police officers who responded to the scene, and I have asked the acting ministers to make sure those individuals are receiving the support they need," he said.
"Indeed, the whole Cairns community and the people of Queensland will feel the effects of this tragedy, particularly at a time of year when families come together."
"I ask that all Queenslanders reach out to those who may need support in coming days and do not hesitate to seek professional assistance if needed."
Queensland Opposition Leader Annastasia Palaszczuk said the deaths were "absolutely heartbreaking news".
The Department of Communities is sending a team to Cairns to "deal with the human and social recovery".
"It is similar to community recovery," a spokeswoman said.
The spokeswoman could not confirm whether the family was known to the department.
- with Amy Remeikis