The 21-year-old woman and 32-year-old man suffered life-threatening burns when the fire erupted around 9:20 p.m. near 79th Avenue and Cholla Street.
Peoria police and fire spokeswoman Amanda Jacinto said the explosion likely involved a natural gas line.
The residents were reportedly doing renovations at the house, including digging in the backyard. According to Jacinto, investigators believe the homeowners may have nicked or damaged the gas line, causing it to leak.
Crews are still unsure what sparked and led to the explosion.
Officials with Southwest Gas and investigators with the Bureau of Alcohol, Tobacco, Firearms and Explosives were also called in to assist in the investigation.
Crews on Wednesday night turned off the gas to nearby homes as they probed the blaze.
Fire Capt. Rob Brewster says the house was fully engulfed when firefighters arrived.
Neighbors said they heard and felt a loud explosion and saw two people running from the home with burn injuries.
One neighbor who lived less than 200 feet away ran to help. Andre Perez says the man and woman were in bad shape.
"When he got closer I got a look at him, and I see the skin coming off of his hands, chest and neck. He had pieces of plastic in his arm," Perez said.
Perez says he brought them water as they waited for first responders to arrive.
"I didn't think twice, I just got up and ran out there," he said.
Jacinto said the man suffered burns to 60 percent of his body, and the woman was burned across 40 percent of her body.