The incident occurred when Koti Mahendra (10) and Vaddi Karthik (9) were playing near the tank after returning from school, an official attached with Palasa police station said.
Both of them slipped into the tank and drowned. After their parents lodged a complaint, a search was initiated and their bodies were fished out from the tank, he said.
A case has been registered in this regard and investigations are underway, police said.