Each of them could face up to 30 years in federal prison on each count.
According to an affidavit, an undercover officer posing as a 13-year-old girl online engaged in a chat with Smith, who sent images of his genitals to her via his Web camera.
That led agents to search his Hollandale, Wis., home Feb. 28. They discovered two digital camera memory cards, one dated November 2007 and another dated February of this year.
The cards contained multiple images of the twins in various stages of undress, arranged in sexually provocative positions and being sexually assaulted.
The woman told investigators she and Smith took turns taking pictures of each of them sexually assaulting the girls. She said she would give her daughters cough syrup before the assaults.
The woman also said she was at Smith's house in Hollandale in August 2007 when Smith sent some sexually explicit pictures of the girls to someone online.
Smith told investigators he sexually assaulted the girls, and the February 2008 assaults took place at the woman's home. The affidavit describes her home as being in central Illinois but doesn't say what city she lives in.
The woman's attorney, identified in online federal court records as Erika Bierma, did not return a message left at her office by The Associated Press Wednesday evening.
Smith's attorney, William Jones, declined comment.
Both defendants were being held in the Dane County, Wis., Jail.