Five people were inside the home on J Street near Mount Hope cemetery when the fire started just after midnight.
"My son knocked down the windows kicked the door in but the smoke was so great," said Grover Williams, neighbor.
Williams son was one of several neighbors who tried to rescue the family trapped inside.
"He pulled the babysitter out, but he couldn't get to the kids," said Williams.
Heavy flames engulfed the home by the time firefighters arrived. They rushed inside and saved two children, immediately taking them to an ambulance. Two adults were inside the home somehow managed to make it out with some burn injuries. The third child was not able to get out and died in the fire.
"He was a nice kid, he was a gifted child," said Ramon Vasquez.
Vasquez said the child was his grandson Fernando.
"Nanno was home with his younger brother and sister, they were being watched by their aunt and her boyfriend," said Vasquez. "My daughter is away taking her older daughter to college."
The two surviving children were taken to UC San Diego Burn Center in moderate condition, firefighters said.
"They have some pretty bad burns, and they had to be induced into a coma," said Vasquez.
Investigators haven't been able to pinpoint the exact cause of the fire, but have ruled it an accident.
"From what the babysitter told me that second oldest daughter put a mattress down by the heater to keep the kids warm so the kids lay next to the heater," said Williams.
"I don't want to even go in the house," said Vasquez as he looked at the burnt shell of his daughter's home.
For Ramon and his family, the tragedy is only just beginning.
"You know, I finished all my Christmas shopping," said Jean Portacio, Grandmother. "I already have all the presents, but Nanno is gone. The present is in my house, I'm so sad."
Two firefighters were also hurt while fighting the blaze. One was burned and another had an injured knee. Crews managed to knock down the flames around 1:20 a.m. The fire caused $400,000 in damage to the home.
[This story originally mentioned that the victim was a 10-year-old boy. It has since by updated to 12-year-old]