Police were called when the teens were found injured in Main Road West.
One boy suffered numerous stab wounds, while the other had stab wounds isolated to his upper body. Both were rushed to hospital.
The 17-year-old from Kings Park was taken to the Royal Melbourne Hospital where he later died, while the 18-year-old from Kings Park was taken to The Alfred hospital, where he is being treated.
One neighbour, who didn’t want to be named, said he rushed out of the house when he heard police sirens.
“I saw police trying to resuscitate the [boy],” he said. “I saw screaming and shouting … one woman came running from one of the houses.”
Neighbours Loren and Lee Howard also ran into the street when emergency services arrived.
Ms Howard, 31, said pools of blood were visible, and people who appeared to be family members of one of the boys rushed out with towels to treat their wounds.
“One boy was just lying in a pool of blood and people were rushing out to try and save him,” she said.
“We saw family yelling as ambulances arrived … there was lots of crying and screaming.”
Mr and Ms Howard believed one of the boys lived in a house on the street.
Ms Howard said there had been three stabbings nearby in recent years, and several arson attacks.
Anyone with information is asked to contact Crime Stoppers on 1800 333 000.
Paul is a reporter for The Age.