The head-on collision between a VW Passat and Peugeot 306 happened on the A429 between Moreton in Marsh and Stow on the Wold at 2120 GMT on Friday.
All four people in the Peugeot and the Passat driver died at the scene.
The Passat driver's partner, their two grandchildren and their aunt were taken to hospital, but the partner died.
The two children aged nine and 10 from Stow are described as being in a critical condition.
Their 34-year-old aunt is also critical.
The children's grandfather who died at the scene was 53 and also from Stow. Their 61-year-old grandmother had been sitting in the front passenger seat.
Superintendent Jerry Foster-Turner said: "This is the worst loss of life in one incident on Gloucestershire's roads for many years, and our thoughts are with all of those people who have been affected.
"Especially the family and friends of those who have sadly lost their lives, and the three casualties."
Road closures remain in place and police are appealing for witnesses.
The Peugeot and the Passat, both registered to county residents, crashed head-on as the Peugeot tried to overtake another car, said a Gloucestershire Police spokeswoman.
Sergeant Kevin Roseblade added: "A Peugeot 306 travelling north to Moreton was overtaking a Kia and collided head-on with a VW Passat that was travelling in the opposite direction towards Stow.
"The four occupants from the Peugeot - from Moreton or Chipping Norton - were all declared dead at the scene.
"The driver of the Passat was likewise declared dead at the scene. And the other front seat occupant of that was a 61-year-old female and she died earlier this morning in hospital."
Neither of the female occupants in the Kia was hurt.
The nine-year-old girl is being treated at Bristol Children's Hospital for abdominal injuries, while the boy is at Frenchay Hospital with head injuries.
The occupants of the Peugeot were a 35-year-old man, a 31-year-old woman and a 15-year-old girl from Moreton in Marsh, and a 20-year-old woman from Chipping Norton.
The junction of the A429 and A44 in Moreton in Marsh remain shut, as does the A429 Longborough turning, the A429 at Stow, and the Donnington crossroads.