A boy, his sister and their male cousin were found by one of their mothers when she returned to the apartment late Thursday afternoon. One child was beheaded, the other two partially beheaded.
"I've been around for 35 years and I've seen, unfortunately, my share of murders, but I've never seen something as bad as this," said Deputy Police Commissioner Kenneth Blackwell.
Two people have been arrested, a source, speaking on condition of anonymity, said Friday.
Further details were not immediately available. Police planned to hold a news conference to announce what they described as a "major development" in the case.
A weapon was found outside the apartment and homicide detectives are questioning an unidentified "person of interest" in connection with the crime.
Blackwell said the children had returned home from school about 3:30 p.m.
The mother, who speaks Spanish and little English, notified a neighbor when she made the discovery about 5:45 p.m. The neighbor called 911.
Police say the mother gave police information about where to find the man who is now being questioned. It wasn't clear if the man was one of the two people arrested.
Officers found him a few blocks away from the crime scene. Blackwell said the man's relationship to the children, if any, was not known.
"We see this as an isolated incident," Blackwell said. "Neighbors have no reason to be concerned" about their safety.
According to the Baltimore Sun, police believe the man had some sort of dispute with the children's relatives.
The paper also quotes Blackwell as saying that police are also "looking elsewhere," implying that there may be more suspects.
Al Johnson is the neighbor who called 911.
"They were very nice, cordial kids," Johnson said. "It's such a shock to everyone. "It's a very quiet, peaceful community."
"They were beautiful children," said another neighbor, Theresa Hopson, 58, in an interview with the Sun. "When you saw one, you saw all three. They appeared to be very close to each other... It's devastating, absolutely devastating."
Matt Teichman, 17, a student at Talmudical Academy, was returning home from prayers when he heard the sirens and saw police.
"We walk here late at night and we usually feel safe," he said. "Now, I don't know what to feel. I can't really believe it."