The pair had been radicalised online and were headed for an unidentified "conflict zone", Mr Dutton said.
Australia estimates that 90 of its citizens are fighting with IS in Syria and Iraq.
The boys, who have not been named because of their age, were arrested by Australian Federal Police officers on Friday.
They were released into the custody of their parents.
"These two young men aged 16 and 17 are kids, not killers, and they shouldn't be allowed to go to a foreign land to fight then come back to our land eventually more radicalised," Mr Dutton said.
The immigration minister said the boys were issued with court notices, implying they had been charged.
But a spokesperson for the Australian Federal Police (AFP) said on Monday that, while there was an ongoing investigation into the incident, no charges had been brought against the boys.
'Lure of the death cult'
Prime Minister Tony Abbott said the boys had "succumbed to the lure" of IS.
"These were two misguided young Australians, Australian born and bred, who went to school here, grew up here, imbibed our values, and yet it seems they had succumbed to the lure of the death cult and they were on the verge of doing something terrible and dangerous,'' he said.
"I'm pleased that they've been stopped and my message to anyone who is listening to the death cult is block your ears. Don't even begin to think you can leave Australia," he added.
Australia's The Age said on Sunday that it had identified another young recruit pictured alongside Islamic State fighters in December as an 18-year-old from Melbourne.
Hoax reports when the image first emerged suggested he was a Briton called Jonathan Edwards, but according to The Age he is called Jake and he studied at Craigieburn Secondary College in northern Melbourne.
Australia last week made it a criminal offence for an citizen to set foot in the Islamic State (IS) stronghold of Mosul without a legitimate reason such as a visit to family.
Any Australian who travels to the city could face 10 years in prison.
Similar restrictions making it an offence for Australian citizens to travel to the Syrian province of al-Raqqa, another IS stronghold, were put in place in December.