A 10-year-old boy has died and an eight-year-old girl has life-threatening injuries following an incident in Coupar Angus at around 2.30am on Sunday.
Police responding to calls found the two children at the property and an injured man nearby.
The boy has been named as Kane Morris, died at the scene.
The girl, who is understood to be his sister, was taken to Ninewells Hospital in Dundee with serious and life-threatening injuries.
A 37-year-old man has been arrested over the incident.
Chief Inspector Ian Scott, of Police Scotland said: "At this time, our thoughts are very much with the family and friends of the young boy who has died in this incident and with the young girl who remains in a serious condition in hospital.
"I can confirm that a 37-year-old man has been arrested in connection with this incident.
"Inquiries are ongoing, however I believe this to have been an isolated and contained incident with no threat to the wider public.
"There will be a police presence at the scene for some time while we undertake our investigation and I would like to thank the local community for their patience whilst we carry out our work.
"There will be additional patrols by local community based officers in Coupar Angus to help provide some reassurance to the community."
Perthshire North MSP John Swinney said: "This is devastating news and my heart goes out to the children and their family and friends.
"The Coupar Angus community is so close to home for me and the news is literally impossible to comprehend.
"I urge anyone with relevant information to share that with Police Scotland. I will do all that I can to help everyone affected by this tragedy."
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