The residents, a woman and her daughter, were initially believed to have escaped the fire, which broke out on Ideal Avenue just after 10:50 p.m.
But firefighters became concerned that no one was outside the home, and the bodies were discovered inside the remains of the house. The victims were identified as 53-year-old Diane Young and 27-year-old Jacqueline Young.
"I knew the young lady that lived there," one neighbor said. "She was a friendly girl. She was always walking up and down the street with her dog. Very, very friendly. It's just a shame."
The fire was contained to the second floor after firefighters got a quick upper hand and extinguished the flames in about a half hour.
"Crews made an aggressive attack and quickly extinguished the fire," Fire Chief John D'Altilio said. "Right now, it's under investigation by the Middletown Fire Marshal's Office, the Monmouth County Fire Marshal's Office and also the Monmouth County Prosecutor's Office."
Neighbors remembered the Youngs as nice people, adding they opened their home to neighbors for showers and food after many lost power during Hurricane Sandy.
They say that Diane Young worked as a mail carrier, while Jacqueline was a nanny.
It appears that the younger Young was able to save her dog, and authorities were looking into whether or not she ran back inside to try and save her mother.
Neighbors were horrified as they saw the flames shooting through the second floor of the home in Middletown last night.
Diane's relatives say the two women were found in each other's arms, and authorities now say, they both died of smoke inhalation.
The mother and daughter remembered as kindhearted neighbors, always willing to help especially after many people on this block lost their power in Superstorm Sandy.
The origin of the fire was on the second floor of the home and the cause has been determined to be accidental.