Fourteen other people were injured in the incident, which comes after unrest in the city of Rochester following the suffocation death of Daniel Prude while he was arrested by police.
As many as 100 people were at the gathering when the shooting started just before 12.30am local time (5.30am BST), acting police chief Mark Simmons told reporters.
Officers are still trying to piece together who opened fire and why.
Police on Saturday night identified the victims as 19-year-olds Jaquayla Young, a graduate of East High School, and Jarvis Alexander, a graduate of University Preparatory Charter School for Young Men, or UPrep. No arrests have been announced.
“We have two innocent victims here that were attending a party with a few friends and unfortunately they lost their lives as a result because three or four individuals decided to carry handguns and pull them out and shoot at a crowd of 100 to 200 people,” police captain Frank Umbrino said at a news conference.
None of those who were wounded are believed to have life-threatening injuries. They are being treated at two area hospitals.
The shooting comes as the city’s police department has been rocked by days of protests over Mr Prude’s death, caused when officers put a hood over his head to stop him from spitting, then pushed his face into the pavement until they noticed he had stopped breathing.
On Monday, the city’s mayor sacked police chief La’Ron Singletary, who she said initially misled her about the circumstances of the death.
Other senior police officials announced they would retire or leave top command positions.
Mr Simmons expressed frustration early on Saturday that someone had held a large, late-night party amid that tumult, apparently in defiance of a state ban on large gatherings because of the coronavirus pandemic.
“This is yet another tragedy where individuals are having these illegal, unsanctioned house parties taking place in these properties, which – number one – is not safe because of Covid-19, because of the conditions. And then you add in alcohol and violence and it just becomes a recipe for disaster,” Mr Simmons said.
Officers responded to calls of shots fired and found “approximately 100 people” running from the scene, Mr Simmons said.
Before the call, police were not aware of the party and had received no complaints about noise, he said.
Rochester mayor Lovely Warren issued a statement asking for “prayers and support for all involved”.
She said: “I’m begging everyone to remain calm and exercise deep restraint as RPD investigates what happened here and seeks those responsible.”
