The sisters, identified as Pinesetti Jayasree (11) and Pinesetti Vijayasree (9), were students of class VI and class IV, respectively, of Ravindra Bharati School, they said.
The girls were riding pillion on the bike driven by their uncle K Kanaka Rao when the mishap occurred, police said, adding that the private school bus coming from the opposite direction collided with the bike on the narrow road.
"Rao fell on the left side and escaped unhurt after the collision. However, the girls fell on the right side of their vehicle and got crushed under rear wheels of the vehicle," police said.
Postmortem of the bodies was conducted and a case registered against the driver who is taken into custody, police said, adding they have impounded the bus.