Emergency services were called to Ashcroft in Sydney's southwest following reports of a crash about 10.50am on Monday.
Officers were told a speeding grey Ford Falcon sedan crashed into a tree and a power pole on Maxwells Avenue, only a few blocks from a primary school and a childcare centre.
NSW Police Assistant Commissioner Brett McFadden said the car was travelling well above the 50km/h speed limit and "separated in half quite dramatically" after smashing into the power pole.
The two boys were thrown from the car and died at the scene, which he described as "catastrophic".
They are yet to be formally identified but are both believed to be aged between 10 and 15.
Police are now searching for the two young males who emerged from the wreck and ran off.
"A driver who was responsible for the occupants of his passengers and a front seat passenger made a decision to flee the scene," Mr McFadden said.
"When you've caused that much carnage and you don't stick around to take responsibility for it, it's a weakness of character."
The front half of the car ended up next to a jacaranda tree while the boot was strewn in the front yard of a nearby home.
Wreckage from the crash also littered the road, with Mr McFadden describing the scene as one of "absolute destruction".
"Anyone who witnessed that crash would no doubt be traumatised by it," he said.
"Two families are now going to be experiencing the absolute heartache it is to have some lives taken from them, which are clearly avoidable."
Officers with police dogs are scouring the bushland surrounding Cabramatta Creek at Magee Street and Maxwells Avenue in the hunt for the car's other occupants.
There were no reports of other injuries or vehicles involved, police said.
Detectives are combing through CCTV and dashcam footage in the hope of identifying the driver and other passenger.
Mr McFadden said the car had recently been sold and the registration details were no longer current, making it difficult to identify the owner.
The car had not been reported as stolen.
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