The blaze occurred when the family members were asleep in their house on the first floor.
The fire broke out possibly due to a short circuit in the shop on the ground floor, Vidisha district Superintendent of Police (SP) Dharmendra Choudhary told reporters.
The fire was noticed around 3.30 AM and because of suffocation all the five family members were killed, he said.
Nearly a dozen fire-tenders were pressed into service to douse the flames which were brought under control after nearly eight hours.
The deceased were identified as - Chandrapal Arora (60), his wife Meena (55), son Jatin (33) his wife Poonam (30) and their four-month-old son Mahir, police said.
The markets in Vidisha town remained closed today as a mark of respect for those killed in the mishap.
Madhya Pradesh Chief Minister Shivraj Singh Chouhan also reached Vidisha earlier in the day to express his condolences over the incident.
