One helicopter crashed upside down into a sandbar at the water's edge, scattering debris over a wide area in the accident about 2pm on Monday near the theme park at Main Beach.
Four people were killed and three passengers critically injured.
The second aircraft landed safely, but the windscreen was damaged and a number of people were injured by glass debris.
"After our initial inquiries, it appears that one has been taking off and one has been landing," Acting Inspector Gary Worrell told reporters.
"Those two aircraft then collided, have crashed and landed on the sandbank just out from Sea World resort.
"As a result of that, four people have lost their lives today and we have three others who are critical in hospital."
Ambulance supervisor Jayney Shearman said another six patients were treated mainly for glass shrapnel wounds.
"There's a number of injuries, what we call multi-system trauma, which means there was a lot of impact to the body," she said.
The popular Gold Coast theme park was rocked by the tragedy.
"We and the entire flying community are devastated by what has happened and our sincere condolences go to all those involved and especially the loved ones and family of the deceased," a spokesperson for Sea World Helicopters said.
"We are cooperating with all the authorities, including the Australian Transport Safety Bureau and the Queensland Police."
Premier Annastacia Palaszczuk offered her condolences to all involved.
"What has happened on the Gold Coast today is an unthinkable tragedy," the premier tweeted.
"My deepest sympathies are with each of the families and everyone affected by this terrible accident."
Witness Jonathon James Spagnol said the crash happened after helicopters got too close, with the rear rotor of one sawing off the other's.
"Yea 2 choppers hit each other. Look like one went up and one was coming back in. Chopped the back off the other landed on the sand bar. Was right behind us," he wrote on Facebook.
Julie Cannock reported a huge bang as the aircraft collided.
"Awful watching this happen live in front of us," Ms Cannock said on social media.
"So lucky for the families and boaties on the beach under where they crashed ... huge bang as they collided and the rotors flew off and then watched in slow motion as the 1st chopper crashed to the sand bar ... still in shock ... so sad for the families on what was supposed to be a lovely days sight seeing tour."
Billie Tunks said on Facebook: "Saw it hit something from the car and it just went straight down. Hope everyone is okay."
People on jetskis and in boats rushed to help the victims at the small sand island off the theme park before paramedics and police arrived.
A LifeFlight Helicopter circled over the scene before another was seen heading the site just before 3pm on the Flight tracker website.
The Australian Transport Safety Bureau was investigating the collision, chief commissioner Angus Mitchell said.
"The ATSB asks anyone who may have seen the collision, or who witnessed the helicopters in any phase of their flights, or who may have footage of any kind, to make contact via witness@atsb.gov.au,'' he said.
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