The owner of the pension, in the city of Gangneung on South Korea's east coast, found the 10 people around 1:12 p.m. Police said the students were vomiting and foaming at the mouth.
The students, all of whom are males who attend Daeseong High School in Seoul, were on an excursion after finishing the state-administrated scholastic aptitude test for university entrance.
The seven injured students were whisked to three hospitals in the city, with two of the seven in critical condition. Rescue workers transferred the two to a hospital in the city of Wonju in the province to have them receive hyperbaric oxygen treatment.
Police are investigating the cause of the incident.
They made reservations at the holiday property with their parents' consent and arrived at the pension around 4:00 p.m. the previous day. The high school has reported the group's trip to Ganenung to the Seoul Metropolitan Office of Education.
The living room and other rooms at the pension where they were staying contained a high concentration of carbon monoxide, police said.
According to firefighters, levels of carbon monoxide concentration were detected to read at 155 parts per million (ppm) at the scene, well above the standard 20 ppm.
"We are treating this as an accident, not a suicide or a murder," Lee Jin-ho, chief of the Gangneung Fire Station, told reporters at the scene.