An investigation is underway into an explosion at Anna Bay which left a young girl and her father with shrapnel wounds.
The blast from an old military ordnance occurred in the backyard of a property in Morna Point Road just before 10pm.
Firefighters quickly set up a 50 metre exclusion zone while the Army Bomb Squad was also called in.
The 4-year-old girl and 37-year-old man were treated at the scene by paramedics before being taken to John Hunter Hospital in a serious but stable condition.
"It's believed they had located some unexploded ordnance on a beach during the day, and had handled those, and one of those items had detonated in their backyard that evening," Inspector Alan Jansen said.
A number of items were removed from the home by Defence Force personnel.