The 70-year-old man died after the house was partially buried in a "sea of mud" unleashed after the hill behind the building gave way as a result of the unprecedented volumes of rainfall experienced across swaths of northern Italy in the last two weeks.
Rescue workers managed to drag the 16-year-old granddaughter from the rubble after more than four hours of digging but she died later in hospital.
Her parents and grandmother survived. The family's small, two-storey villa was the only property affected in Cerro, a hamlet on the outskirts of Laveno Mombello, a popular holiday spot.
A neighbour described how he had been awoken during the night by a huge bang "like fireworks".
"Then my house began to shake. Firefighters and civil protection officers were there very quickly and started digging with spades, even with their bare hands. The parents were helping them...it was a horrific scene," the neighbour told Italian television.
The tragedy means a total of 11 people have died in accidents related to the freak weather conditions in just over a month.
That toll was expected to rise to 12 later on Sunday as rescue workers continued to search for a man whose car was swept off the road by a torrent of water near Genoa, the main city on the Italian Riviera.
Genoa is particularly vulnerable to flooding because the foothills of the Alps climb steeply from immediately around the city. The city experienced 139 millimetres of rain in a matter of hours on Saturday.
The Liguria region has had as much rain in the first 15 days of November as it normally gets in an entire year.
The rain relented on Sunday, leaving local authorities to begin a clean-up and repair operation for which the bill is expected to run into hundreds of millions of euros. There will also be legal repercussions.
Three landslide deaths last week are already the subject of manslaughter investigations and in Genoa there is anger among residents that the city was not better prepared after floods in 2011 that left seven dead.