Devon and Cornwall Police said one worker’s condition was described as critical and the other serious following the incident on Monday morning.
The men, both in their 40s, were airlifted to Derriford Hospital in Plymouth following the collision involving a van on the A361.
The van driver was arrested on suspicion of dangerous driving and later released on police bail to a date in May.
The injured men were carrying out repairs in a closed lane for South West Highways on behalf of Devon County Council.
Another worker suffered minor injuries that did not require hospital treatment, while a fourth man was treated for shock.
A Devon County Council spokesman told the Mid Devon Star: “We have been notified of an incident on the A361 involving two members of staff from Devon County Council’s highway maintenance contractor SWH, who were working on a closed lane of the highway. We are awaiting further details but our thoughts are with the staff and their families at this time.”
Ben Pyle, managing director of South West Highways, added: “Everyone at SWH is distressed about the incident and our thoughts are with our colleagues and their families.”