The fire broke out at around 5:26 pm (0926 GMT) Sunday in eastern Zhejiang province, the official Xinhua news agency reported. It was extinguished in less than two hours.
Eight lost their lives in the fire, while another 10 died in hospital, according to Xinhua.
Video posted on Chinese social media website Weibo showed thick black smoke billowing from the massage parlour and people jumping out of the second-floor window of the six-storey building.
Shards of broken glass were strewn across the floor of the massage parlour. "Windows in the third and fourth floor, where residents lived, were also shattered," the Beijing News said, quoting a witness.
The cause of the fire is unclear, Xinhua said.
Fire safety procedures are routinely ignored in China, with exit doors often locked and escape passages blocked in buildings across the country.
Seven people died in a fire in an elderly care facility last month.
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