The Victoria Police arson squad says two men who were critically injured in a backyard explosion south-east of Melbourne last night were experimenting with chemicals.

A 24-year-old Pakenham man and a 23-year-old man from Cannons Creek are undergoing emergency surgery after the chemicals they were mixing exploded.

The arson squad says the men planned to bury an improvised explosive device they had made, but it blew up earlier than they had expected.

Earlier police speculated they were trying to make a rocket.

They say family and friends were watching, but no one else was injured and no property was damaged.

The Pakenham man lost both legs in the explosion and has extensive hand injuries.

The Cannons Creek man also suffered serious injuries. Both are in a critical condition in hospital in Melbourne.

Senior Detective Cameron Lunny says there was nothing sinister in what the men were doing.

"At this point there's no rhyme or reason for it. They were just having a bit of a muck around I think," he said.

"There's certainly no indication that it was anything apart from experimenting."

Paramedic Ben Meadley likened the injuries to those normally seen on battlefields.

"One (patient) had severe airway burns and the second patient suffered severe blast-type injuries, the type of injury you'd more liken to what you'd see in a war situation, rather than in outer suburban Melbourne," he said.

The Pakenham man required a blood transfusion on the helicopter en route to hospital.

"Due to his severe blast injuries he'd lost quite a lot of blood. We started by having to give him a blood transfusion," Mr Meadley said.

"We were able to give him quite a bit of blood. Then we were able to given him some powerful drugs and put him into an induced coma."

Neighbour Judy Gibbs says the explosion was huge.

"I'd gone to bed and next minute there was this great big loud explosion," she said.

"The windows in the house shook. The whole house shook."

ABC/AAP