Janet Herd and Linda Tansley, both 48 and from Bradford, were in a Ford Fiesta which was in a collision with a Mercedes at Apperley Bridge.
Five people in the Mercedes CLK 200 - two men aged 22, two girls aged 15 and a 19-year-old woman - were injured and were being treated in hospital.
The five, all from Leeds, were arrested after the crash on Wednesday night, a West Yorkshire Police spokesman said.
As a police vehicle had been alerted to the stolen Mercedes just before the collision, the matter was referred to the Independent Police Complaints Commission (IPCC).
'Terrible tragedy'
The IPCC said it had now completed its investigation into the crash and would be taking no further action.
A spokesman said evidence from police logs and witnesses revealed that an officer who was looking out for the stolen Mercedes near Harrogate Road in Bradford pursued the car in a police vehicle for around 75 seconds before the crash.
| Police are appealing for witnesses to the crash to come forward |
Witnesses said the police car was 50 to 100 yards, or three to four seconds, behind the Mercedes at the time of the collision.
Nicholas Long, IPCC commissioner for Yorkshire and Humberside, said: "My sympathies go out to the families and friends of the two women who died. This was a terrible tragedy."
The crash happened close to a pub at about 2315 BST.
Det Supt Dave Pervin, of West Yorkshire Police, said: "Due to the time of night and location of the collision it is likely this incident will have been witnessed.
"We would like to speak to anyone who saw the incident or the red Mercedes shortly before the collision occurred."
The main A658 Apperley Lane was closed both ways between the B6152 Micklefield Lane and A657 New Line while investigations were carried out at the scene.
Police said the road reopened about 1215 BST on Thursday.
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