A 17-year-old girl is accused of stabbing her younger sister to death while they were alone in the family home, with police saying the “unthinkable” crime happened “completely out of the blue”.

Emergency services were called to the home at Boolaroo, about 20 kilometres south-west of Newcastle in the New South Wales Hunter region, to reports of a stabbing about 3.45pm on Monday.

Paramedics treated the 10-year-old for multiple stab wounds to the chest, but she died at the scene.

Her older sister was arrested and interviewed overnight before being charged with domestic violence-related murder and has been refused bail while she remains before a children’s court.

Superintendent Tracy Chapman said there was no record of police being involved with the family previously “for matters such as this”.

Investigators will speak with neighbours and other family members. One neighbour, Cindy Holloway, said it was an “awful” incident.

She told News Ltd a grandmother, mother and two daughters had lived in the home for three years.

Holloway said the street was “very quiet”, with a lot of renters and older residents.

Detective Superintendent Danny Doherty was reluctant to detail the family dynamics but said police believed the alleged attack happened in the family home.

“They were the only children in the house,” the veteran homicide detective said on Tuesday.

“It is very hard to imagine. It is unthinkable that this could happen to a 10-year-old.”

Police said the young girl was allegedly stabbed multiple times in her upper body with a “sharp instrument”.

The attack appeared to have come “completely out of the blue”, Doherty said.

He said police would allege the teenager was “solely responsible” for the younger girl’s death.

“My thoughts go out to the mother at home having lost a 10-year-old in a tragic loss of life, and now has another daughter facing court allegedly responsible for killing the 10-year-old. So this is terrible situation for her to be in,” he said.

“What we allege is this was a violent act, but it’s also a tragic incident.”

NSW Police deputy commissioner of regional NSW field operations, Paul Pisanos, said emergency responders tried to revive the girl.

“Emergency services did try for some time to try to revive the child, but unfortunately they were unsuccessful and the child was deceased,” he told Sydney radio 2GB.

State MP Greg Piper said the tragedy had hit two school communities and devastated everyone in the Lake Macquarie area.

“The family and the community will live with the implications of this for many years to come,” he said.

“Wherever I and my office can provide support, we will.”

Counselling is being offered at both schools.

The 17-year-old was not present when the matter was briefly mentioned in the Broadmeadow Children’s Court in Newcastle on Tuesday.

There was no bail application made and the case was adjourned until June.

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-with AAP