The fire happened before 7 a.m. at a home on N.C. Highway 61 in Gibsonville.
Investigators believe the victims are 1-year-old Jade Hawks and 4-year-old Matthew Ridge-Powls. Firefighters found the children dead in the same bed.
Police say the kids were staying with their grandfather at the time. He tried rescuing them, but wasn't able to save them.
Firefighters say the blaze started when a space heated got too close to some combustible material. It has been ruled an accident.
Authorities say the home didn't have working smoke detectors.
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