Rudi Garcia's team stay two points behind leaders Paris Saint-Germain and Lille, which earlier won 1-0 at Rennes, after a comfortable victory at the Stade Geoffroy-Guichard thanks to two carbon copy headers from Brazilian Marcelo, another brace from Kadewere and a Denis Bouanga own goal.
The win put Lyon back on track after falling at home to Metz last weekend but came against a Saint-Etienne team missing seven players following a Covid-19 outbreak at the club which also led to president Roland Romeyer testing positive.
Ten-time French champions Saint-Etienne sit 16th after the defeat, only four points above the relegation zone after their miserable run of form was extended to just one win in their last 18 matches.
"This might have been our most complete performance. We could have scored more but winning a derby 5-0 is not something that comes every day," said Garcia.
Kadewere put the away side in the lead in the 16th minute when a Memphis Depay corner fell to the Zimbabwean, who only had to tap home to open the scoring.
Mattia De Sciglio almost doubled Lyon's lead when he smacked a long-range shot against the bar seven minutes later, but it didn't take too for the deserved second goal to arrive.
Leo Dubois whipped in a superb free-kick into the Saint-Etienne area in the 36th minute which allowed Marcelo to attack the ball aggressively and head in his first goal of the season.
Marcelo repeated the trick just before the hour mark when he met another perfect Dubois cross to crash in the third, before Kadewere claimed his ninth of the campaign in the 68th minute after collecting a pass from Memphis Depay.