The seven victims were inside their yurt home when the fire erupted in the early morning, a police spokesman said, adding that the three kids were under five.
Firefighters arrived within minutes after receiving an emergency call, but failed to save them, said the spokesman.
The cause of the fire was still under investigation.
Most Ulan Bator residents live in wooden-walled yurts, or cottages, that face high risks of fire. The city has recently issued several warnings concerning spring fires.