The suspects said they chased down the primates with dogs, then shot, stabbed or hacked them to death with machetes, police said.
The men allegedly told authorities the owners of several palm oil plantations on Borneo island offered $100 for every orangutan killed and $20 for every long-nosed proboscis monkey.
If found guilty of violating conservation laws, they face up to five years in jail, police said.
Indonesia -- home to 90 percent of the orangutans left in the wild -- has lost half of its rain forests in the last half century in its rush to supply the world with timber, pulp, paper and, more recently, palm oil.
The remaining 50,000 to 60,000 apes live in scattered, degraded forests, putting them in frequent, and often deadly, conflict with humans.
Police said the case was being investigated, but refused to say if plantation owners would become suspects.
A study published this month in the journal PLoSOne said villagers in Kalimantan, the Indonesian portion of Borneo, admitted to slaughtering at least 750 orangutans over a year.
Some were killed to protect crops, others because villagers thought the animals were dangerous. A much smaller number were hunted for their meat, the survey showed.
"The simple conclusion is that orangutans will be hunted to extinction unless someone stops the killings," main study author Erik Meijaard said Wednesday.
"It's a blatant infringement of Indonesia's conservation laws," he said. "I really hope that both the perpetrators and the plantation managers who ordered the killings will be punished accordingly."
The two men were arrested Sunday in Muara Kaman village in east Kalimantan after the bones of several orangutans and proboscis monkeys were recovered.
Yaya Rayadin, a researcher from Mulawarman University in the Kalimantan town of Samarinda, said the bones were scattered in 15 different places and that tests in his lab indicated the deaths were violent.
Most had hack marks on their skulls, jaws and ribs, he said.
Rayadin said he believes many more people were involved in the killings.
He said he first told authorities in 2008 that palm oil plantations were offering rewards to locals who slaughtered orangutans or monkeys -- with pictures or video offered as proof -- but that until now no action had been taken.
"The fact police have arrested two people is a sign of remarkable progress," he said. "But the main thing now is to find a way to protect the orangutans that are still alive."
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