It's understood a house at Ardmore Park in the city came under petrol bomb attack at around 9pm.
The two girls and a boy were taken to hospital.
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An 11 year old girl and her year old sister, who were in the living room when the attack happened, are being treated for burns, although their injuries are not believed to be life-threatening.
It's understood the girls' grandmother put out the flames with a fire extinguisher.
One man has been arrested and is being held at Waterford Garda Station.