The coach was carrying more than 50 passengers yesterday on what is believed to have been an Age Concern trip to the popular seaside town of Looe when it careered into a hedge on the A387 at Morval at around 1pm, Devon and Cornwall Police said.
A woman died at the scene while a second woman was taken by air ambulance to Derriford Hospital in Plymouth but was pronounced dead on arrival, police said.
Seven other passengers were seriously injured and four walking wounded were also treated after the coach crashed on the winding road.
Police arrested the driver, a 57 year-old man from Exeter, yesterday afternoon and he was taken into custody at Launceston police station.
All seven seriously injured were taken to Derriford Hospital, while other passengers were taken to a nearby village hall where four walking wounded were treated and tea and coffee was handed out.
Roberta Powley, who lives in the nearby village of No Man's Land, said she had been told the coach had been taking pensioners on a trip to Looe when it crashed near the Snooty Fox hotel.
The coach was travelling towards Looe from the direction of Plymouth, between Sandplace and Widegates, when it crashed.
In a statement on the Carmel Coaches website the company said: "Carmel Coaches extends our deepest sympathies to those involved in today's accident. We are co-operating with the authorities in the investigation of this tragic event."
Devon Air Ambulance tweeted a message of condolence to those injured.