The women were still at home three days after being officially notified they would have to serve a yearlong term of reeducation through labour, but were under surveillance by a neighborhood watch group, said Li Xuehui, the son of one of the women.
A rights group said the threat of prison appeared to be an intimidation tactic.
Li said no cause was given for the order to imprison his 79-year-old mother, Wu Dianyuan, and her neighbor Wang Xiuying, 77.
"Wang Xiuying is almost blind and crippled. What sort of reeducation through labour can she serve?" Li said in a telephone interview. "But they can also be taken away at any time."
The order followed the pair's repeated attempts to apply for permission to hold a protest at one of three areas designated by the government as available for demonstrations during the games, which end Sunday.
Beijing has used the existence of the protest areas as a way to defend its promise to improve human rights in China that was crucial to its bid to win the games.
Some 77 applications were lodged to hold protests, none went ahead. Rights groups say the zones were just a way for the Chinese government to put on an appearance of complying with international standards. A handful who sought a permit to demonstrate was taken away by security officials, rights groups said.
"China is riding roughshod over its promises to allow lawful protests during the games," said Nicholas Bequelin of the New York-based Human Rights Watch.
The cases of Wu and Wang "show that while China has now proven it is able to host international events to perfection, it still has a long way to go before it respects even minimal international human rights standards," he said.
Giselle Davies, spokeswoman for the International Olympic Committee, said past Olympic hosts have designated protest areas and that the body hoped Beijing would stick to its promise of allowing demonstrations.
The reeducation system, in place since 1957, allows police to sidestep the need for a criminal trial or a formal charge and directly send people to prison for up to four years to perform penal labour.
Critics say it is misused to detain political or religious activists, and violates suspects' rights.
The Public Security Bureau had no immediate comment. A spokeswoman for the Beijing reeducation through labour bureau said, "We have no records of these two names in our system."
Meanwhile, an activist group said five American bloggers have been detained since early Tuesday in Beijing. The bloggers, who did not have media credentials, were protesting China's policies in Tibet, said Kate Woznow, campaigns director for the New York-based Students for a Free Tibet.
They were the latest of more than a dozen foreign activists who have been detained in Beijing this month for launching similar protests. Most have been quickly deported.
Also Tuesday, five Americans who unfurled a "Free Tibet" banner near an Olympics venue were detained along with U.S. graffiti artist James Powderly, who planned to use laser beams to flash a similar message on buildings in Beijing, said Woznow. The banner protesters have been released but Powderly was still detained, she said.
Foreign Ministry spokesman Qin Gang declined to discuss the specifics of the protest policy at a regular news conference Wednesday. "In China, like in other countries, to apply for a demonstration, you have to obey the law," he said.
Protests have become common in China, where simmering resentment over layoffs, corruption, land confiscation and other issues explode into sometimes violent action. The communist leadership remains wary about large demonstrations, fearing they could snowball into anti-government movements.
The sensitivity is more marked during the Olympics, which is meant to showcase China to the world.
Wu and Wang, diminutive, gray-haired women, seem like unlikely activists.
Wang, who used to sell ice-cream, hobbles along with a wooden cane, one hand holding onto Wu for support. But Li said they have been fighting for their cause since being kicked out of their Beijing homes in 2001 to make way for redevelopment. A year later, their electricity at a temporary home was cut because they refused to sign papers allowing the developer to provide them with a second home.
They complained to district officials, then to city authorities, and finally demonstrated 16 times this year in two of Beijing's most sensitive areas - Tiananmen Square and Zhongnanhai, the compound where China's leaders live and work.
"Defending the rights of the people is still such a difficult thing even 60 years after the establishment of the republic," Li said.
