Around 50 firefighters were called to the scene in Stoborough Meadow, near Wareham, at the height of the blaze at 10.18pm on May 19.
Mike Willetts, who lives across the road from the properties, said he heard a loud thunder bolt before seeing “massive flames” coming out the windows.
He added that watching the scene was scary and that firefighters were tackling the blaze until around 2am.
Christine Talbot, member of the resident’s association, said: “Just before we saw a flash and then a terrible crash.
“Thankfully no one was hurt.”
In daylight, the thatched roof can be seen to have collapsed into the house and down the staircase.
Residents said that the occupants of the first house, who are understood to be a couple, had to wake up the second resident, an elderly lady, and help her leave her home.
Next-door neighbours to the affected houses, John and Sue Carvell, said the incident was “very frightening.”
“They have lost everything,” said John.
Residents, Dave and Allison Paignton, said their house also has a thatched roof and this incident has made them consider replacing it.
“When the lightning struck, it lit up the whole house,” said Dave.
“All we could do was sit and watch the devastation.”
George Slack captured this video of the fire @Bournemouthecho pic.twitter.com/sHyFMA2A9o
— Hannah Knight (@HKnightEcho) May 20, 2024
Dorset and Wiltshire Fire and Rescue Service said at the height of the incident crews attended from Wareham, Poole, Hamworthy, Swanage, Redhill Park, Wimborne and Springbourne.
Along with a water carrier from Poole, an incident command vehicle from Hamworthy, a support appliance from Poole and an aerial ladder platform from Westbourne.
A spokesperson from DWFRS: “The fire had started in the roof of a semi-detached cottage and quickly spread to the adjoining home.
“Firefighters worked through the night to contain the fire, which has caused significant damage to both properties.”
After midnight the incident began to be scaled back and relief crews attended from Shaftesbury, Christchurch, Blandford, Sturminster Newton and Ferndown, as well as a water carrier from Ringwood and an aerial ladder platform from Salisbury.
The stop was reported at 7.51am on May 20 but crews from Bridport, Gillingham and Westbourne remained on the scene until noon.
Re-inspections will be held on May 20 to check for remaining hotspots.
No-one was injured and the fire was believed to have started accidentally due to a lightning strike but investigations are on-going.