Care worker Saima Khan, 34, was found with serious injuries in Overstone Road on 23 May and died at the scene.
Sabah Khan, who is registered as living in the same house in Overstone Road, was arrested by Bedfordshire police on Tuesday and has now been accused of killing her sister.
The 26-year-old was remanded in custody and is due to appear before magistrates in Luton, on Thursday.
Mrs Khan's husband, Hafeez Rehman, said their four children had been deprived of their mother and the family's hearts had been "torn apart".
A 26-year-old woman has been charged with the murder of her sister in Luton.