The shooting happened in the 3500 block of West School Street Wednesday evening in the Avondale neighborhood.
The children -- a 7-year-old girl who was shot in the back and a 2-year-old who was grazed in the head -- were transported to Children's Memorial Hospital where they are listed in serious to critical condition. Their injuries are not considered life threatening.
Police are looking for a 1998 purple Plymouth van that they believe the gunman was driving.
As investigators searched an alley for evidence, parents in the neighborhood recounted what they saw and heard.
"I was in the back of the house, heard four shots. I come up and see that kids were running and...after that the cops came," said Dan Coscinski, area resident.
"It's scary now because my daughter, she's six. Now I am a little hesitant taking her back over there. I don't think I will go back over there," said Cyndi Rivera, area resident.
Witnesses say the gunmen were apparently firing in the direction of a basketball court behind the Avondale Park Park District field house. Several bullets hit the children.
A number of area residents and police coincidentally were inside the field house at the time of the shooting for a CAPS meeting which was just letting out.
"I heard five shots go off. And they told us, everybody hit the floor. And we waited a few minutes. And the police officer that was there left the building. We looked outside the windows. I seen a gentleman holding a child that had been shot in the back," said JoAnn Trainer.
Residents are now asking for a greater security presence in the area.