Msaba Zungu and Thabitha Thusi, both 60, were seized from their homes near Manguzi in KwaZulu-Natal province.
Students and adults dragged them to a sports field where they were doused with petrol and set alight on Sunday.
Manhlenga High School pupils accused the women of being witches after they began to suffer strange crying fits.
Investigators said Ms Zungu died at the scene and Ms Thusi succumbed to her burns injuries on Monday.
Police captain Jabulani Mdletshe told the BBC News website: "On 17 August, the students at the mixed high school began to cry randomly and they did not know why.
"The students held a couple of meetings and allegedly decided the problem was these two women were witches who had cast a bad muthi (spell) on the school.
"At 8pm on Sunday, some students and community members allegedly took the women from their homes to a football field and set them on fire."
No arrests have been made but police are following a positive line of inquiry, said Capt Mdletshe.
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