Emergency services were called to reports of an altercation at a home in Clyde North, in Melbourne's outer southeast, just after 9.30pm on Thursday.
Two men were found with stab wounds and treated by paramedics, but both died at the scene.
Police are yet to formally identify the men but believe they were known to each other.
Homicide detectives say they are searching for a third man, whom they believe fled the scene before emergency crews arrived.
Neighbours have been told to stay inside as police investigate the double stabbing. (Diego Fedele/AAP PHOTOS)
The crime scene on on Observatory Street was extended on Friday morning to include a nearby display home car park metres away.
Neighbours were shocked to hear sirens in the normally quiet street around 9.30pm.
They told AAP there was a party at the home in question on Thursday evening, which may have got out of hand.
"It's very scary," one neighbour, who didn't want to be named, said.
"We actually watched as the police arrived, for quite some time, but police told us to stay inside our homes for our own safety."
The man and his wife were working from home on Friday morning, as police try to piece together what happened.
The estate, which is off Thompsons Road, is relatively new with the first residents moving in around seven years ago, neighbours confirmed to AAP.
Numerous forensic police and homicide detectives arrived at the scene shortly before 9am on Friday and a police officer at the scene said they are expected to be there for most of the day.
Two SES tents remain in the street, one covering what is believed to be a body.
Homicide squad detectives are expected to speak to the media later on Friday, and have urged anyone with information to contact Crime Stoppers.
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