Police spokesman Micky Rosenfeld said the suspects were arrested in June but police had been under a gag order not to make the arrests public.
He said both men, from the occupied West Bank, had admitted under questioning to involvement in the killings, but neither had yet been formally charged. He said he had no further details.
The lynchings took place in the West Bank city of Ramallah, where an angry mob set upon the two Israeli reservists who had been seized at a Palestinian checkpoint and taken to a police station, choking and beating them to death.
A third suspect, photographed shaking bloodied hands from a police station window, was arrested shortly afterwards, but was one of hundreds freed in a swap in October with Hamas for soldier Gilad Shalit, after five years in captivity in Gaza.
The lynchings occurred as a wave Palestinian protests launched in late 2000 after failed peace talks spiraled into an uprising. It engulfed Israel, the West Bank and Gaza Strip in a five-year cycle of violence in which human rights groups say more than 3,700 Palestinians and more than 1,000 Israelis died. (M014)
Editor: Kunto Wibisono
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