It is unclear if the pair are armed, but parts of Nerang bounded by Riverpark Drive, McLaren Road, Kowhai Place and Inverness Street are locked down on Thursday morning.
Paramedics are on standby at the scene and the nearby St Brigid's Primary School will remain shut.
The siege began when police arrived in the area to arrest one of the men, who they say is subject to a return-to-prison warrant for allegedly breaching bail conditions.
Police say one of the men removed an ankle monitor used to track his movements.
Detective Acting Superintendent Chris Ahearn said the situation was contained and no hostages were involved.
"We are acutely aware of the impact on the local community in that area with having a situation like this unfolding," he said.
"It's our intention to resolve it as soon as we can but our critical objective is for the situation to be resolved to ensure the public's safety."
It is believed one of the men is a high-risk violent offender, possibly connected to two shootings on the Gold Coast in recent days.
In one of those incidents, a gun was fired at a family's car as they drove home from dinner in nearby Coolangatta on Saturday night.
The bullet shattered the car's window and was millimetres from directly hitting a 55-year-old father in the front passenger seat.
He was treated for a graze to his neck, while his wife and son were not physically harmed.
In the early hours of Monday morning, multiple shots were fired from a car at the Arundel Police Beat.
No one was injured in the drive-by attack but bullets hit the building and a police car parked outside.
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