Parks Victoria and Victoria Police interviewed the two men on Saturday for wood theft and cutting down large trees.
The News first reported tree felling in Reedy Swamp in October after being alerted by Shepparton man Joel Hoffman.
Parks Victoria said officers seized a large amount of equipment including a wood splitter, chainsaw chains and bars, and more than five cubic metres of wood.
The arrests were part of Operation Macquarie that involved Parks Victoria gathering evidence of tree felling.
It identified a number of people who have been carrying out illegal commercial scale tree harvesting.
Parks Victoria senior manager enforcement and regulatory services Ron Waters said its part of a zero-tolerance approach to illegal firewood collection.
"...Given the negative impacts it has on forest health, wildlife habitat, public safety and the sustainability of firewood resources that local communities rely on," Mr Waters said
"I also have concerns that trees of cultural significance to Traditional Owners could be terribly impacted by harvesting of firewood outside of the regulations.”
"The apprehension of these two men sends a strong message to others doing the wrong thing. Anyone detected illegally harvesting firewood outside of the regulations can expect to lose equipment and vehicles and face large court-imposed penalties.”
Mr Hoffman said the arrests were "awesome news" and hopes there will be more arrests to come to deter people in the future.
Operation Macquarie is part of an ongoing effort by Parks Victoria and the Conservation Regulator, targeting people illegally harvesting wood.
Parks Victoria said it will continue to investigate due to a long history of tree felling in the area.
People are encouraged to report suspected illegal tree felling to Parks Victoria on 13 1963 or the Office of the Conservation Regulator on 136 186.
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