Australian police said on Saturday they had arrested the mother of most of eight children reportedly stabbed to death in the northern city of Cairns, as vigils were held to mourn the tragedy.

Officers have not revealed the cause of death of the children, aged between 18 months and 14 years, but said knives were found at the house where the bodies were discovered on Friday morning.

Flowers and teddy bears were laid near the crime scene and church services were held overnight in Cairns for the killings, which have shocked the community.

"The 37-year-old mother of several of the children involved in this incident has been arrested for murder overnight and is currently under police guard at the Cairns Base Hospital," detective inspector Bruno Asnicar told reporters.

The woman, believed to be the mother of seven of the children and the aunt of the eighth, has not been charged, but Queensland Police said she was assisting them with their inquiries.

"She's stable and being looked after," Asnicar said, adding that the woman, who has stab wounds to her upper body, was "awake ... lucid and speaking". He could not say whether her wounds were self-inflicted.

"At this stage we're not looking for anybody else. We're comfortable that the community at large is safe," he added.

The murders have rocked Australia, which is still reeling from a dramatic siege in a central Sydney cafe this week that left two hostages and a gunman dead and prompted a huge outpouring of emotion.

The dead children were reportedly discovered by the mother's 20-year-old son when he arrived at the house in the Cairns suburb of Manoora on Friday morning.

The deaths have come as a shock to police, who said the house was not known as a "problem house".

"This is just an ordinary neighbourhood," Asnicar said. "A lot of good people, a lot of kids in the area and this is just something that has caught everybody by surprise. It's absolutely tragic."

Candlelit vigils and church services took place in Cairns overnight, and police said they are working closely with the indigenous Torres Strait Islander community to which the family belonged.

Torres Shire Council Mayor Pedro Stephen told Australian Associated Press that the entire region was grieving.

"It's like a bomb has gone off," he said. "Everyone is in shock." Acting Assistant Police Commissioner Paul Taylor said the impact of the deaths would be felt across Australia.

"There will be people who have never, ever been to Cairns who will be touched by this tragedy," he said.

Reports said a woman was heard screaming in the house on Thursday night, with Brisbane's Courier-Mail saying she was heard to shout: "Don't let them take away from us. God bless us. Forgive me for what I'll do."

One neighbour told the paper the woman was having "a bad night" on Thursday.

"I heard her fighting with someone this morning about 4:00 am" on Friday (1800 GMT Thursday), she said. "I last saw her about 6:00 am, then it was quiet.

"I saw her moving stuff out of the house yesterday. She was putting furniture and stuff out the front on the street, giving stuff away to family and friends.

"She said she was changing her life. She wasn't well but she loved those kids."

A 13-year-old girl who is friends with one of the children that lived in the house said she had walked her friend home on Thursday night after shopping and had met the mother, who had given her money for a taxi ride home.

"She was saying stuff about God and other stuff," she told Australian Associated Press. "She said: 'Papa God gave me the power to do anything'."