The consignment, seized late Monday, is worth around Rs.60 crore internationally and Rs.16 crore in the domestic market, police said.
According to police inspector Walchand Munde, the raid followed a tip that a warehouse in the coastal village of Uran had large quantities of red sandalwood to be shipped to Gujarat.
Police found 10 tonnes of red sandalwood logs, the length ranging between eight and 15 feet, hidden under bales of hay.
Interrogation of the two accused led to more red sandalwood, around four tonnes, stored in a warehouse in Taloja at Navi Mumbai.
The consignment was handed over to the forest department for evaluation and further action.
Based on ink markings on the logs, police suspect the consignment was smuggled from Andhra Pradesh.
Police are probing the antecedents of the arrested men and hope to lay their hands on an inter-state gang active in red sandalwood smuggling in Karnataka, Andhra Pradesh and Maharashtra.