The many children of the East Capitol Dwellings public housing project were asleep when the fire started early yesterday, and in one apartment, according to fire officials, two of them were sleeping alone.

So, on the coldest morning of the season so far, 5-year-old Kylisha Halfacre and her 16-month-old brother Charlie, who neighbors said had gone to bed to the flicker of candlelight in an apartment without electricity, died when the candles apparently ignited a smoky blaze fueled by mattresses and bedspreads.

"I used to watch out for 'em sometimes because they were good friends with my boys," said neighbor Josephine Ross from her bed at D.C. General Hospital, where she was recovering yesterday from a broken ankle suffered when she jumped from her third-floor apartment to escape the fire. She said the family's electricity had been turned off Friday.

The Halfacre children's parents could not be reached for comment yesterday, but D.C. fire officials confirmed the reports by neighbors that the children were at home alone when the fire broke out. An investigation of the fire is continuing, a fire department spokesman said yesterday, but candles now appear to be the likeliest cause.

Charles C. Halfacre, who was identified as the father, told a reporter early yesterday that he was helping a friend move and was not at home when the fire started. He said he understood that the fire was ignited by a candle.

Neighbors who tried to rescue the children said there were three older girls in the family who were visiting friends in the vicinity when the fire occurred.

In a neighborhood frequented by tragedy, where the crime rate is among the highest in the city, where the address of the apartment building on 58th Street NE -- 249 -- is spray-painted in black on a brick wall and half the apartments are vacant, boarded and vandalized, the death of two children by fire still cut through the emotional scar tissue and hit a nerve.

"I just can't understand it," said next-door neighbor Derrick Benson, 17, a high school dropout who, although dressed in party clothes that morning, kicked down the door and tried to crawl through the burning apartment to save the children.

"I yelled for them to come out, but there was a wall of hot ashes and flame," Benson said. "It was raining. I got my clothes all messed up and my hand cut, and the babies still died . . . . I wish it had been me rather than those babies."

Gabriel Lee, a 10-year-old playmate of the dead children, tried to sort out his feelings from his bed at D.C. General yesterday where he was recovering from smoke inhalation and struggled to hold back the tears.

"My mother woke me up and when I looked out of the window I saw fire," the boy said. "I tried to open my door but smoke came in." He said he had never been so scared in his life. Standing in his third-floor window, he watched as parents from the second floor tossed their children into the hands of neighbors. People were yelling for him to jump. He couldn't. Then he saw his mother, Josephine Ross, hit the ground.

Ross said yesterday that she had been calling her son's name, and when she didn't hear a response she had panicked and jumped.

"As soon as I jumped, I realized I had to go back and get them," Ross said. Suddenly, the fire trucks arrived and Gabriel and his brother Andre, 6, were rescued.