Such was the intensity of the explosion that the shock wave partially damaged nearby houses, two-wheelers and bicycles.
The deceased have been identified as Palavalasa Chandar Rao and Gedela Pothayya, police said.
According to police, the crackers were manufactured illegally without license in the house to cater to growing demand during the marriage season and local festivals.
"The incident occurred when Rao and Pothayya were manufacturing crackers with the help of members of their extended family without any license," said police inspector Sanker Rao.
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"Rao and Pothayya died on the spot while eight others sustained over 60 per cent burns," the inspector said.
The injured were rushed to King George Hospital at Visakhapatnam in critical condition.
The fire was doused later by fire brigade personnel who rushed to the village from nearby Rajam town.