The victims were trapped inside the house in Ambalavato village of Ikalamavony district in the rural centre of the Indian Ocean island.
The party-goers, including several relatives of the house owner, were celebrating the renovation of the house.
Fire engulfs residential building in Karachi
"Of the 39 people in the house, 38 were killed, including 16 children," Herilalatiana Andrianarivosona, spokesman for the police, told AFP, adding that the fire was an accident.
The blaze is believed to have started from embers of a fire that had been used earlier to cook food for the guests.
Other villagers tried to rescue the people trapped inside but failed to open the door.
Only one 14-year-old boy managed to escape the inferno by jumping through a window, police said.
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