Trina Heisch was found in a closet inside the Phoenix home she shared with the suspect, who has not yet been identified by police.
The 49-year-old victim and the suspect reportedly have histories of mental illness, domestic violence and drug abuse. They met at a mental health facility, family told KPHO.
Neighbor George Loney told the station that he called police around 9:45 a.m. Saturday, after stopping by to check on Heisch.
"I hadn't heard from Trina in two days which is highly unusual," he said.
The suspect allegedly answered the door naked.
"So right away, I know something's wrong," Loney said. "He tells me he killed three of his family members, but it's OK God forgives him ... I looked down, and I see his arm is missing."
Loney said he noticed large amounts of blood in the house.
"It's like 'The [Texas] Chainsaw Massacre,'" Loney said.
Loney said that after he left to call police, the suspect continued to mutilate himself.
"By the time the cops made it, he had already ripped out his eyeball," Loney said.
The suspect was taken to a hospital and is recovering from surgery. Police said the suspect was arrested in 2003 for attempting to kill a family member. He will be charged when he is released from hospital, police said.