Friends and neighbours of an Oshawa, Ont. family that was viciously attacked over the weekend say a deranged family associate is to blame for murdering a "beautiful" mother of three.

Durham police spent Sunday at the townhouse with a forensic team and investigators from Ontario's Special Investigations Unit. They were called to the scene just before 4:30 p.m. Saturday after a woman frantically called 911 about a stabbing at the home.

When police arrived, they found a 29-year-old man, his 26-year-old wife and their two children, all of whom had been stabbed. The woman, Leslie Kelly died from her injuries. Her husband Rick and their children, three-year-old Riley and five-year-old Nate, are being treated in hospital for serious injuries.

The man responsible for the attacks is believed to be 47-year-old Gino Petralia. He was shot dead during an altercation with police when he was confronted in an adjacent townhouse unit.

The family was celebrating the birthday of nine-year-old Brandon Kelly when Petralia entered the home and threatened Rick with a knife, said Dave McLean, a family relative.

"It's nuts. It's just crazy, the whole situation," he told The Canadian Press. "I couldn't believe it at all. I didn't even think it was real."

Petralia's 13-year-old son was living with the Kelly family since the teen's mother died, McLean said. The teen is Rick's half brother.

Petralia has suffered from a mental illness for the past decade and had been on social assistance.

"I just think that he snapped finally, because he has a tendency to go off. Not as severe as this. He's just nuts," said McLean, who claims to have known the suspected assailant for the past 30 years.

McLean said Leslie jumped in front of her husband when Petralia pulled out a knife and lunged at her husband. She was stabbed several times in the chest.

"All hell broke loose," said McLean, who called Kelly "a beautiful mom."

"She's a hero -- I mean, she saved him."

Neighbours said all of the Kelly family members were nice people who worked hard.

"We've just been sitting there in a daze all morning," said Chris McIntosh, who lives across the street from the family. "I was up with my children ... they were crying their eyes out."

Autopsies on the body are scheduled for Tuesday.

The SIU is a civilian agency that investigates circumstances involving police and civilians which have resulted in serious injury, sexual assault or death.

With files from The Canadian Press