Police Scotland confirmed that the bodies of two children were recovered from the car in Loch Nan Druimean, near the village of Kilmelford, south of Oban, on Wednesday night.
The young brother and sister have been named by police as Leia McCorrisken, three, and two-year-old Seth McCorrisken.
Their mother, who was driving the car, was taken to Oban Hospital as a precaution and later released.
It is understood the family are from the isle of Luing, south of Oban.
Today it emerged that passing motorists had tried to help the 36-year-old woman get out of the water.
Iain MacKinnon, Station Officer of Oban Volunteer Coastguard team, confirmed that the mother had been assisted by a member of the public.
He said: “We were there about 4.40pm and the police, fire and ambulance were at the scene.
“The vehicle was completely submerged in the water, we couldn’t see it at all, we reckon the car had about 15 feet of water above it, so the water at that point of the fresh water loch was about 40ft deep.
“Some passing motorists had entered the water in an attempt to help, there were certainly still one or two there when we arrived, they were in blankets.”
Mr MacKinnon, 56, added: “I think some motorist helped her to get to the shore, but I don’t know any more details. Presumably the mother was swimming, trying to get to the shore, when the guy went to help her.
“The water was bitterly cold, probably 5 or 6 degrees - that loch, it freezes over in the winter but the temperature is pretty much the same now as in the winter.”
While the mother was cared for by an ambulance team Mr MacKinnon said other emergency service workers tried to reach the sunken vehicle.
He said: “Firemen were attempting to dive down and we put somebody in the water to help them, our man is a qualified diver and was able to assist the firemen, but the car was just too deep to get to, it is that kind of dark, peaty water.”
Police divers, who were flown in by helicopter from Greenock, eventually arrived and were able to reach the car and retrieve the bodies.
Mr MacKinnon added that cold water shock would probably have affected anyone trapped in the loch very quickly: “Cold water shock grips you and it’s very difficult to survive that for any amount of time.”
Argyll and Bute SNP MSP Mike Russell said the incident had shaken both the local community and the region of Argyll.
He added: “It is a bad piece of road, it’s a difficult piece of road, and the weather was very bad yesterday.”
Nigel Mitchell, chair of Kilninver and Kilmelford Community Council, said he has known of at least four fatalities on that stretch of road in the 10 years he has lived in the area.