Several people are said to be trapped.
There are fears that many others have been trapped, even as scores sustained injuries in a fire whose cause has not been established.
Meanwhile, fire fighters from Kisumu County are battling the blaze.
The fire broke out at 4am and as at 8am it had not been contained.
The fire brigade pulled out the two charred bodies from gutted rooms of the club located on Kondele-Kibos road in the outskirts of Kisumu city.
Rescuers, mainly the public, were battling to access the club as the fire raged.
Mr Francis Aluko, a witness, told the Nation that the fire broke out as they slept.
"We heard a bang and came only to find the guesthouse on fire," Mr Aluoko, a survivor told the press
Another witness, Mr Erick Otieno, said some four people were rescued earlier before the intensity of the fire increased.
The cause of the fire was not established immediately but Kisumu county police chief John Kamau said he would address the media after the operation.
Deputy Governor Mathews Owili and a team from the county government were at the scene.