The family were visiting the Solfatara crater at Campi Flegrei (Burning Fields) about 30km east of Naples, when they fell into the crater, killing the parents and their 11 year old son.
Armando Guerriero, the bar's owner, said: "He saw his parents and brother falling into the crater; he didn't know whether they were alive or dead". When they fell into the volcanic system, it's likely that the fumes killed them on inhalation.
The boy's parents went to get him back but the smouldering ground collapsed beneath him and his father, plunging both of them into a scorching hot 5ft hole of toxic gas.
The family, originally from Turin but living near Venice, were on a visit to the tourist site.
Only the seven-year-old stayed behind the barriers and ran into a bar to raise the alarm.
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"I was at the Solfatara for work, along with other visitors we realised that something had happened and we approached the crater - still confessed the witness - I did not imagine what I would see".
"We tried to calm him", he said.
Their bodies were retrieved a short time later before being placed in body bags and being taken away by an ambulance.
Heavy rain in the area may have played a part in creating more holes on the volcanic crater's surface. Solfatara is dormant volcano which still releases steam and fumes. He also suffocated on the toxic gasses emitted from the volcano.