Both girls had suffered stab wounds, police said. They were called to the scene in the town of Langelsheim, near Goslar, shortly after 8am Tuesday by the girls' grandfather. The mother, 34, was still the scene and she is now the focus of the investigation, police said.
A third daughter, also five, was taken to hospital with superficial cuts. She was being cared for by her grandparents.
The grandfather phoned the emergency services Tuesday morning and said he had just discovered the bodies of his two grandchildren in the house, police said. Paramedics rushed to the scene, but the children were already dead.
The Braunschweig state prosecutor ordered a forensic examination of the crime scene Tuesday. Police and the prosecutor's office refused to comment further.
However a press conference is scheduled for Wednesday morning.
Just three weeks ago, the bodies of two sisters, aged eight and 11, were found by their own mother in Krailling, Bavaria. The girls' 50-year-old uncle is the chief suspect in that case.