Local police said four men arrested in relation to the murders of Neil Dalton and Aidan Brunger in the early hours of Wednesday had admitted the crime.
The owner of a bistro in the Jalan Padungan area of Kuching in Sarawak province, in the west of the Malaysian part of Borneo, said he saw one of the alleged killers calmly walk away after the incident. Avinash Ran told a newspaper: "He looked right into my eyes when he saw me and slowly walked around the side of the car and got in the passenger seat.
"He was trying to act all cool in front of his friends, but his eyes were wide like two moons. I don't know if he was on drugs, but he wasn't acting normally.
"Nobody acts like that after stabbing someone. It was like it was nothing to him."
Mr Ran said he and a waiter tried to help Mr Dalton and Mr Brunger, both 22, but they died before an ambulance arrived 30 minutes later.
Deputy police commissioner Chai Khin Chung said yesterday that the men had confessed, and police would now pass on their evidence for prosecution. He said: "The crime has been solved."
He said the two students had got into an argument with the men in the bar and after leaving on foot, were followed and attacked.
Malaysia's The Star newspaper has reported the main suspect is a 23-year-old fishmonger, one a 29-year-old mechanic, and the others, 19 and 35, are unemployed.
It has been reported that two Irish medical students were assaulted just days before the stabbings.
Dr Chin Zin Hing, medical director of Sawatar Hospital where the men were working, said it is providing counselling for other students, while Newcastle University said two members of staff had been sent to Kuching to offer support to other students.