Emergency services were called to Ashcroft in Sydney's southwest following reports of a crash about 10.50am on Monday.
Officers were told a grey sedan crashed into a tree and a power pole on Maxwells Avenue.
"Two people allegedly exited the vehicle and ran from the scene," NSW Police said in a statement on Monday.
Two young male passengers died at the scene of the crash, which police described as "catastrophic".
They are yet to be formally identified but are both believed to be aged between 10 and 15.
The badly battered vehicle was split in two after the single-car collision, with the front half resting next to a jacaranda tree while the boot lay in the front yard of a suburban home.
Wreckage from the crash also littered the road.
Officers with police dogs were seen scouring the bushland surrounding Cabramatta Creek at Magee Street and Maxwells Avenue in the search of the car's other occupants.
Investigators established a crime scene, which is expected to be in place for some time.
There are no reports of other injuries or vehicles involved, police said.
Detectives are combing through CCTV and dashcam footage to identify the driver and other passenger.
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