Commissioner Steel said the children's mother, Milka Djurasovic, had been arrested at a nearby beach at Kallaroo, about 11km to the west of Madeley at 8.40pm.
She was under police guard in hospital yesterday with "self-inflicted, non life threatening injuries".
According to The West Australian, people who know the Bosnian family said Nenad found one of his daughters on the floor near the entrance to the home and the other in the laundry.
Commissioner Steel said the mother was undergoing treatment and was yet to be interviewed by police.
"This is a tragic event and our heartfelt condolences go out to the friends and family of the children," he said.
"Heartbreaking events like this have an effect not only on those directly involved, the friends and family, but on the wider community of Western Australia."
WAtoday reports neighbours called police after hearing screams coming from the house.
According to a newsletter published on the school's website in December last year, Tiana received an honour for displaying "a variety of skills and attributes over the course of the school year".
Her sister Mia was also acknowledged in March this year for "excellence".
The children's father is assisting police.
"The scene is quite complicated, there are a number of witnesses that are helping police, that have information to provide," Commissioner Steel said.
"The children's father is one of those people who's actually with police and we're trying to assist with his welfare as well.
"Our thoughts are also with those first responders, the police and the ambulance who discovered the bodies of these children.
"We all have kids … it's actually the fact that we all have children in our lives that makes this so relatable."
The West Australian reports the family's neighbour, Didi Lee, said her 10-year-old daughter Evania was best friends with Mia.
"They are best friends. They play together and go to the park together, they are from the same school," Didi told the publication.
"If I go out every morning I saw them."
A neighbour told Nine reporter Darius Winterfield young families with children lived in the area and he believed a mother with two children lived at the property.
Part of Bogdanich Way was cordoned off today as police searched the property.
An evidence collection station has been established at the house, which is in a new residential estate.
Commissioner Steel said forensic officers and homicide investigators would work "meticulously" at the crime scene in coming weeks.
"I can assure the people of Western Australia, that the WA police are doing all that they can to investigate this matter and try and identify what it is that led to these tragic events.
"Our homicide squad are undertaking a thorough and professional investigation and our highly trained forensic officers are working meticulously through the crime scene to try and identify information which will help us understand what led to these events."
Police said there was no information of any ongoing threat to members of the public.
