The two men, thought to be from France, made a panic-stricken call to a commercial tourism operator shortly before 10pm, saying they were in trouble as a 20 knot southerly swept over the lake, generating waves up to a metre high.
A search began immediately and two bodies were spotted in the water by a helicopter about 1am.
While both men wore lifejackets they had only one paddle and were believed to be novices, Queenstown harbour master Marty Black said.
The men made an call in the afternoon to the tourism operator, in which they were told to head home because a southerly blast was forecast.
"The commercial operator told them they should get the hell off the lake and head back to Queenstown because the last few days there had been strong southerlies come through."
Shortly before 10pm, Mr Black got a call from the operator, who had received a second call from the men on the water.
"I put the flag up, 111, got police, coastguard and everyone involved and went from there but unfortunately we didn't find them in time."
The men were found in the water west of Hidden Island, about 6km from Queenstown.
They probably died from the cold, he said.
"They didn't follow advice and it's a message we want to get out over this. The southern lakes are dangerous, they are cold, you don't last long. Listen to local people and heed advice. They didn't."
The operator knew the men were in trouble when they called.
"From the sound of the phone call the operator got they were panicking. They were in trouble then obviously, and to find someone in the dark doesn't always happen that easily, even though we had good resources with a helicopter and night vision."
"Heed advice and keep off the lake if you don't know what you are doing."
Both men were believed to be in their 20s. Police were trying to locate their next of kin.
The double fatality sent a grim message to lake users, Queenstown Lakes District Council chief executive Debra Lawson said in a statement.
"This is an awful tragedy for these men, their friends and family that should not have happened," Ms Lawson said.
On behalf of the community Ms Lawson extended the council's sympathy to the men's families.
Nothing good could come of the fatality other than have it serve as a stark reminder to residents and visitors that even in summer in the Lakes District, conditions could change quickly.
"The water temperatures in Lake Wakatipu can be refreshing for a summer dip but lethal all-year-round for anyone trying to survive more than a few minutes, particularly in adverse conditions as they were last night," she said.
