A 62-year-old man has now been released on police bail while a woman in her 20s, who police have not confirmed if she is related to the children, has been detained under the Mental Health Act.
Officers arrested the pair after being sent to the flat following an incident reported to the police by a bus driver at about 09:30 BST on Saturday.
The pair were seen to give a young girl, said to be aged three, an alcoholic drink in the street. The child was taken to a south London hospital to receive treatment and has now been taken into care.
Post-mortem examinations are currently taking place to establish the cause of the children's death while child abuse investigators also look into the case.
"Clearly this is a tragic set of circumstances," said Superintendent Chris Boulet from Croydon police.
"Obviously there are a lot of inquiries to be done. This is an early stage in the investigation but we will find the answers."
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