The 71-year-old, identified as Voon Hoo Hee, was with her 25-year-old grandson Clark Jason Chia, a hotel employee, when the fire broke out in the morning.
Sixteen firefighters in three engines were despatched to the scene upon receiving a distress call at 6.43am.
"We managed to bring the fire under control at 7.28am," said Sandakan deputy fire chief, Odin Gilu.
The charred remains of Voon were later found from among the debris. Chia's three younger sisters were at school and his mother was at work at the Sibuga Waterworks Department when the incident occurred.
Some 10 Unicon heads belonging to SJK(C) Pei Yin nearby were also not spared.
The cause of the fire and losses are being investigated.
Meanwhile, a wooden quarters owned by the Ulu Dusun Agriculture Department was destroyed in a fire the same day.
Two vehicles parked near the building were also destroyed, according to fire officer Johnny Yap. .
Ten firefighters in an engine were despatched to the scene, some 30 miles away, upon a distress call at 9.12am.
No casualty was reported.