As they approached the house, a man suddenly emerged and fired more than ten times at them before throwing a grenade in their direction.
Both women were fatally injured, one dying at the scene while paramedics were unable to save her colleague.
A short time later Dale Cregan, 29, who was wanted in connection with the murders of father and son, David and Mark Short, in separate gun and grenade attacks, walked into nearby Tameside police station and gave himself up.
Police said they believed Cregan or someone acting on his behalf had deliberately called the police to report a bogus burglary in a bid to lure officers into a deadly ambush.
Two people, one male and a female, who were believed to be in the house from where the bogus call to the police was made, were last night helping police with their inquiries.
Cregan, who only has one eye, having lost the other in a fight, had been the subject of the biggest manhunt in Greater Manchester Police?s history with officers offering a £50,000 reward for information leading to his capture.
He had been on the run since August, following the murder of David Short, 46, in a grenade attack on his home in the East Clayton district of Manchester.
Two months earlier, Cregan is suspected of having gunned down Mr Short?s 23-year-old son, Mark, in a pub in Droylsden.
It has emerged that Cregan had been arrested by police following the first incident in May, but had later been released on police bail, pending further inquiries.
The Prime Minister David Cameron led condemnation of the killings of WPCs Bone and Hughes, which represents the worst loss of life among British police officers since 1966 when three detectives were gunned down in Shepherd?s Bush, West London.
Mr Cameron said: "What we have seen is the absolutely despicable act of pure evil. The cold blooded murder of two female police officers doing their job out there protecting the public; another reminder of the incredible risks and great work our police service does.
"My thoughts and I think the thoughts of the whole country will be with their families at this impossibly difficult time.?
Praising the bravery and dedication of the two young female officers, Sir Peter Fahy, the Chief Constable of Greater Manchester Police said it was one of the "darkest days? in the history of policing in Britain.
He told a sombre news conference: "We are devastated today by the loss of two of our officers. This is one of the darkest days in the history of Greater Manchester Police if not the police service as a whole because we have lost two deeply loved and valued colleagues.?
Explaining how the police believe that events had unfolded, he said: "Dale Cregan was in a house in Abbey Gardens overnight. At some point this morning, himself or someone else, made a call reporting a burglary.
"The address was not known to us, so as is routine two unarmed officers were sent to the scene. When they arrived Cregan emerged into the road and shot those two officers. Cregan then went to a local police station and handed himself in.?
He went on: "We believe he has been protected by a criminal conspiracy to harbour him. We are determined to find the people behind that and bring those responsible to book.
His colleague Inspector Ian Hanson of Greater Manchester Police Federation described the murders as the "slaughter of the innocents?.
His voice cracking with emotion, he said: "Words almost fail me. I want to look beyond the uniform. What we have got, is two young girls. They have got an absolute right to come home to their loved ones. This is cold blooded murder, the slaughter of the innocents.?
Colleagues of the two women also paid tribute to their bubbly personalities, warm senses of humour and dedication to serve.
WPC Bone, who had served in the police for five years, was planning to marry her long term boyfriend and only yesterday had been excitedly discussing the invites with colleagues.
Her younger colleague, WPC Hughes was described as "lovely friend? who could not do enough to help her colleagues and the public.
A keen Karate enthusiast, she had been in the police force for just three years, but was said by colleagues to love her job.
The murders inevitably sparked a debate last night about the routine arming of police officers and whether female officers should have been attending an incident when the force?s biggest manhunt was still underway.
But Sir Peter insisted there had been no intelligence linking Cregan with the address.
He said: "We are passionate that the British style of policing is routinely unarmed policing. Sadly we know from the experience in America and other countries that having armed officers certainly does not mean that police officers do not end up getting shot.?
As detectives attempted to understand the alleged motive behind the murders, there were suggestions in the local community that Cregan had orchestrated the attacks in order to "go out in a blaze of glory? after becoming aware that the net was closing in on him.
Sir Peter also warned against the dangers of making folk heroes out of those involved in organized crime.
He said: "This case tells us something about the nature of organized crime, the level of intimidation that it creates and the fact people sometimes see others as folk heroes for being involved in this sort of activity.?
Locals said Cregan had been seen on the estate in recent days "swaggering around? and had even been seen drinking in the local pubs.
But Sir Peter insisted there was no intelligence to suggest Cregan?s exact whereabouts or link him with the address in Abbey Gardens.
Witnesses described how they heard a series of loud bangs followed by an explosion yesterday morning.
Local window cleaner Warren Shepherd was on his rounds in Hattersley close to where the officers were shot said: "I just heard gun shots, bang, bang, bang - around ten of them, then a pause and a big explosion.
"There was people, neighbours stood around there and one of my customers said, 'They've been shot! The police officers have been shot!' Everybody was in shock and couldn't believe it.?
Another local, who gave her name as Naomi, 27, said: "I heard about 10 bangs and ran out of the house. A man walked
past me carrying a rucksack. He was expressionless, no emotion.
" I later learned it was Cregan. He jumped in a white BMW and sped off I walked down toward the scene and met up with a man I know, he said he had seen the bodies of the two police officers lying in the front garden, there was blood everywhere. He said a man had shot the two officers, thrown a grenade into the garden and walked away.?
Locals said the house where Cregan was believed to have been staying had belonged to an elderly woman who had died around six months ago.
The property, a council house, had been left empty but there had been some recent activity, with the windows covered in whitewash suggesting the house was being decorated.