The boat is the latest to go down in the waters off the Bodrum peninsula, where refugees gather to make the short but perilous sea journey to nearby Greek islands.
Turkey’s Coast Guard said the two children, one-year-old Diven Halil Hussein and Beren Halil Hussein, aged four, were siblings who had been aboard with other 23 refugees.
The remaining people were rescued.
Thousands of refugees and asylum seekers are still trying to find a passage to western European countries through the Greek islands – the main entry point from the war-stricken Middle East.
At least 3,138 refugees, including 291 in the Aegean Sea, have died while crossing the Mediterranean Sea so far this year, according to the International Organization for Migration.
According to the UN Refugee Agency, the total number of arrivals in 2015 so far in Europe via the Mediterranean is now over 643,000.