Two Duke University lacrosse players were arrested Tuesday morning in the alleged gang rape of an exotic dancer at a team-sponsored party.

Collin Finnerty and Reade Seligmann, both 20-year-old sophomores, were charged with rape, sexual offence and kidnapping.

District Attorney Mike Nifong said he hopes to charge a third person soon.

Duke University president Richard Brohead cancelled the lacrosse season on March 28. (Sara D. Davis/Associated Press)

Finnerty and Seligmann were arrested one day after a grand jury in North Carolina handed down a pair of sealed indictments in the case.

An officer at the Durham County jail said Finnerty and Seligmann were to be released Tuesday on bonds of $400,000 US.

The arrests come just over a month after a 27-year-old black exotic dancer told police that three white men attacked her at an off-campus party hosted by the Duke lacrosse team.

Following the accusations, all but one of the Duke lacrosse players – the lone African-American member – submitted to DNA tests. The results were all negative.

Seligmann's lawyer told the Associated Press Tuesday his client is "absolutely innocent."

The case has heightened racial tensions and put focus on privilege over poverty in Durham, a city of 118,000 whose population is 43.8 per cent African-American. More than 26,000 of its residents live below the federal poverty line, according to the 2000 U.S. census.

Durham is also the home of Duke, one of the country's most prestigious universities, where tuition costs nearly $43,000 US a year. Of more than 6,200 undergraduates at Duke, just 11 per cent of are African-American.

The racially charged situation has spurred several demonstrations, both on and off the university campus.

In the wake of the allegations, Duke cancelled the lacrosse season and the team's head coach resigned.

with files from the Sports Network and the Associated Press