The ghastly crime was committed in Dulla village of Kadiyam 'mandal' (block) in the early hours of the day.
According to police, a youth who was angry with his relatives for performing marriage of their daughter with another man set afire the house when they were asleep.
The woman's 18-year-old brother and five-year-old niece were killed. Four other members of the family were injured. K. Satyaveni and her elder daughter Durga Bhavani were battling for life.
According to police, M. Srinivas wanted to marry younger daughter of her aunt Satyaveni. However, she turned down the proposal and married her off to another man.
Srinivas continued harassing the woman and her family. He attacked the woman and Satyaveni with a knife on January 17. Satyaveni, who had suffered injuries in the attack, lodged a complaint with the police. This further enraged Srinivas, who poured petrol and set afire the house.
According to police, Satyaveni's elder daughter Durga Bhavani along with her three children had come to visit her mother. Durga's daughter was killed while two other children were injured. Durga and her mother suffered severe burns and their condition is stated to be critical.
The police have formed teams to track down Srinivas.
( With inputs from IANS )