The attack was the third time in a month the family have lost a family pet to snakes, after their guinea pig and cat were recently eaten.
Although the couple threw chairs at the 'enormous' python to try and stop it from eating their Chihuahua, the reptile ignored their attempts and swallowed the dog in front of the horrified children.
"We'd had the dog about five years, so it was part of the family," the dog owner, Daniel Peric, told the Cairns Post newspaper.
Peric said his two children, aged five and seven, could also be at risk in the family's north Queensland home. "Actually watching it unfold before your eyes was pretty gut wrenching," Peric said.
Stuart Douglas, owner of the Australian Venom Zoo in Kuranda, said that a snake of that size was "quite capable of killing a small child."
Scrub pythons usually feed on small mammals in the north Queensland rainforest, but as towns like Cairns develop and more and more houses are built close to their natural habitat, snakes are starting to prey on family pets.