Seven females and three males were killed when their home near the city of Pietermaritzburg was ambushed early on Friday morning.
Police Minister Bheki Cele said two suspects had been arrested, one was shot dead and another is still at large. The motive is unclear.
South Africa has one of the world’s highest murder rates.
Police were first alerted to the shooting after neighbours heard gunshots.
Mr Cele said one of the victims was as young as 13, adding: “It’s a crime scene, terrible. Too many people were lost here.”
One child has reportedly been taken to hospital.
According to local media, the gunmen managed to gain entry to the property after posing as police officers.
Mr Cele confirmed they had located the suspects at the house of a traditional healer, where they had sought refuge. Police said one of the suspects – the man who was shot dead – had been on their wanted list for a long time.
This part of South Africa is known for featuring regularly in national crime stats for murder rates – a problem that has plagued it for a long time.
It’s the second mass shooting in KwaZulu-Natal province this week after four people were shot and killed on Thursday at another home north of the port city of Durban.
