San Francisco - Six people, including three children, were killed in a family shooting at an upscale housing development in the heart of California's Silicon Valley, police said Monday.

The suspected gunman was believed to be among the dead inside the modern home, said Santa Clara police Lieutenant Phil Cooke.

"We do believe this appears to be a family-on-family murder- suicide," Cooke said in a televised news conference.

The murder-suicide occurred late Sunday night at the Rivermark townhome development in Santa Clara, about 65 kilometres south of San Francisco. Police discovered five bodies, including a young boy and girl, when neighbours called them to the house at around 8:30 pm after seeing an injured woman outside. The woman and young girl were still alive when the police arrived, but the toddler died overnight. The woman remained in critical condition Monday.

Police said they believed that all the dead were members of one family, but that they were still investigating a motive.

Santa Clara, a relatively wealthy city of just over 100,000 has traditionally been immune to extreme violence. But the recession that has hit California and the tech industry harder than the rest of the country may be taking its toll. In November, an engineer who was fired from his job returned to the firm and shot and killed three colleagues at SiPort, a startup that makes wireless chips.

"When things get tough in life, in the world, it seems that these kinds of incidents erupt," said Santa Clara Mayor Patricia Mahan. "I would just urge all of our community to pay attention to your neighbours."