Police blamed an electrical fault for the blaze. Most of the children escaped unharmed. The school was badly burned.
Riot police were sent to the area as people gathered, concerned that the fire was linked to recent communal violence in other parts of the country.
At least 40 people have been killed since 20 March in the attacks which have mainly targeted minority Muslims.
Police spokesman Thet Lwin told the AP news agency the two-storey building - part of a mosque - in eastern Rangoon sheltered about 75 orphans.
Most of the children escaped by running out of a door after police knocked it open, he said.
Funerals for the boys were to be held later on Tuesday.
The Myanmar (Burma) Police Force said on its official Facebook page that the victims had died from burns or smoke inhalation.
"According to the investigation by township police officers, the fire was caused by excessively high (electric) voltage," it said.
One report said all of the victims were boys. The dormitory had locked its doors because of the recent tensions, so the children struggled to escape, reports said.
"The whole country is worried now for Rangoon, and is wondering whether this was a crime," Ye Naung Thein, a local Muslim leader, told the AFP news agency at the scene.
The fire comes amid an upsurge in violence between Buddhists and Muslims.
On 22 March, a state of emergency was enforced in the central town of Meiktila in the Mandalay region, where violent clashes erupted between Muslim and Buddhist communities after a reported argument at a gold shop.
Many houses and buildings were destroyed in the town and thousands of people, mostly Muslims, displaced.
Curfews have since been imposed in other towns and villages after violence spread.
The violence follows clashes last year in Rakhine state between the Buddhist community and Muslim Rohingyas - a stateless minority group not recognised by the Burmese government.
President Thein Sein has warned that the government will use force if necessary to stop "political opportunists and religious extremists" from fomenting hatred between faiths.
Source: BBC News
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