Two teenage boys, aged 15 and 17, died at the scene and a third, aged 17, remains in hospital. Police are expected to question him once he has recovered.
Emergency crews were called to the intersection of Cowpasture Rd and The Horsley Drive in Abbotsbury, West Sydney, about 4.20am.
The 37-year-old man was arrested at the scene and taken to Fairfield police station, where he was charged with five offences, including dangerous driving occasioning death, driving in a dangerous manner (two counts), dangerous driving occasioning grievous bodily harm, negligent driving occasioning death (two counts).
He has been granted bail to appear in Liverpool Local Court on November 25.
Images show police escorting him from the station about 6.30pm. He had his head and face covered with a fluorescent jacket before he left in a waiting car.
Neighbour Christine Willcocks told 9 News she woke to "what sounded like a lightning strike".
"When I had a look around I heard some male voices screaming out," she said.
It is understood debris from the wreckage was flung up to 100 metres from the crash site.
NSW Ambulance Inspector Joe Ibrahim described the scene as one of the worst paramedics had ever encountered.
"The scale of this accident is absolutely horrendous,'' he said.
"It is probably one of the worst, in fact, it is one of the worst. A senseless and tragic loss of young life, which should never have occurred."
Roads would have been wet at the time.
Residents living near the crash site have turned out to lay tributes, including teddy bears.
