One has burns to his internal airways and lungs.
Fire Service East Otago assistant area commander Trevor Tilyard said the pair had been "huffing" - getting high by inhaling a propellant - from two 9kg gas bottle before the explosion.
The force of the blast blew off much of the tiled roof, displaced walls and shattered windows and left glass strewn on the other side of the street.
Last night a fire investigator and Dunedin police remained at the cordoned-off scene to determine what triggered the explosion.
Mr Tilyard said that as it was only 5C about the time of the explosion, a heater or hot-water cylinder thermostat could have triggered the blast.
"If they were huffing out of 9kg cylinders, then they would not be able to stop it [the fire] spreading."
It was the first time he could recall an explosion as a result of huffing, and he had a simple message for those wanting to try the practice: "Don't."
"It is just so damn dangerous."
Mr Tilyard said the pair were in for a very long rehabilitation.
Dr Leo Schep of the National Poisons Centre said he was distressed about the incident.
At the level people got a narcotic effect from huffing, "you are getting close to the lower flammability limit, that point where you get sufficient concentration to get an explosion".
- Otago Daily Times