Detectives from Devon and Cornwall Police believe the two 19-year-olds were part of a larger group who had taken what they thought was MDMA.
The force said they were alerted by paramedics at around 1.40am on December 9 that two men were unconscious at Pryzm nightclub in Plymouth.
Both teenagers, who are from Okehampton and Newton Abbot, were taken to Derriford Hospital where they later died.
The force said an 18-year-old man is currently in police custody and awaits questioning in relation to the incident.
Detective Inspector Julie Scoles said: "It is currently believed that the two men who died were part of a larger group who had taken what they thought to have been MDMA.
"Many of the group were from Okehampton and had visited Plymouth to attend the Basshunter set at the Pryzm nightclub last night.
"We are investigating these deaths and have located the rest of the group who are thankfully showing no ill-effects at this time.
"We are not currently seeking anyone else in connection to this death, but would like to hear from anyone who has any information that can help us with our inquiries.
"I am urging the public, especially those going out and planning to take recreational drugs, to be aware of this incident and think twice before taking any unknown substance.
"There is always a risk when taking drugs and the only way of staying safe is to avoid drugs altogether."
An investigation into the circumstances surrounding the deaths is now under way, the force said.
Police said their next of kin have been informed, but that formal identification has yet to take place.
Anyone with information should contact the police on 101 or through Crimestoppers on 0800 555 111.
