The incident took place between the seas of Sori and Ndrehet village, along the north coast of Manus between 3-4pm.
Manus Provincial Police Commander, Chief Inspector David Yapu, said a 23-footer boat with 60 horsepower electric motor was carrying 17 passengers on board.
Also onboard was a 44 gallon fuel drum, a 40 HP engine motor and personal properties.
The boat was returning from Kali Island after a burial and was heading back to Lorengau town.
While traveling between Sori and Ndrehet village, they encountered strong winds and rough sea, which resulted in the boat capsizing.
Police say passengers on board, while swimming ashore, were burnt from the fuel spill.
A young boy managed to swim ashore and quickly got assistance from Lohang Logging Camp, where the passengers were rescued, including a pregnant woman.
Unfortunately, the 43-year-old operator of the boat, and a young boy aged 3 years who was carried by his mother – died whilst drifting out at sea.
The skipper was from Kali village, married with three children, while the toddler was also from the same village.
PPC Yapu said those rescued passengers with burns on their bodies were taken to Lorengau General Hospital for treatment.
The bodies of the two deceased are also at the Lorengau General Hospital Morgue.
Yapu is again warning small crafts or boats to take necessary precautions before and after going out at sea.
He said currently Manus is experiencing a strong northwest wind at 25/34 knots causing rough seas and high sea waves.
People should take the warning seriously and not to travel out in this bad weather.