A construction crane collapsed today on New York’s Upper East Side, smashing into a 23-story apartment building as it fell to the ground, killing two construction workers and seriously injuring another.

It was the second deadly crane accident in 2½ months and the latest of several construction mishaps in the city, which recently shook up its Building Department and beefed up inspections.

“What has happened is unacceptable and intolerable. Having said that, we do not know at the moment what happened or why,” Mayor Bloomberg said at a news conference, adding that it appears the builders followed regulations.

City building department records show that inspectors stopped crane work twice last month, once because they said a crane lacked the proper permit and was being operated in an unsafe manner.

The mayor said the top part of the crane snapped off and fell against the building on the southwest corner of 91st St. and First Ave. about 8 a.m. Witnesses described a loud boom, then a cloud of smoke and debris.

“The sound was like a thunder clap. Then, an earthquake,” Peter Barba, who lives on the seventh floor of the damaged building across the street from where workers were erecting a luxury apartment tower, said.

Video from the scene showed the upper-floor balconies of the apartment building were severely damaged and a hole extended several stories down the side of the building. The mayor said seven buildings were evacuated as a precaution.

One body was brought out of the rubble, placed on a gurney and covered in a white sheet. A construction worker knelt over the stretcher, gently stroking the sheet.

Killed were a crane operator, Donald Leo, 30, who was in the cab when it broke away from the spindly machine and plummeted to the ground, and Ramadan Kurtaj, 27, pronounced dead after being taken to a hospital, officials said.

A third construction worker was seriously injured, and one pedestrian was treated for minor injuries.

A construction foreman Scott Bair said one of the workers on his 40-man crew, Simeon Alexis, was taken to the hospital with his “chest slashed open.”

“Everyone was shook up and crying. These are some hardened men, but they were crying,” he said.

Chaos enveloped the largely residential neighborhood of town houses and apartment high-rises as dozens of emergency vehicles raced to the scene during the morning rush hour.

The manager of a Duane Reade pharmacy on the ground floor of the building that was hit, Robert Lopez, said he was 10 feet from the window when he heard “a big boom.”

“Everybody was yelling and running and calling 911,” he said. When he looked out again, he saw part of the crane had landed just feet from the window where he had been standing.

A retired inspector for the Consolidated Edison utility, Susan Haines, said she went out on the street when she heard the commotion and saw neighbors running.

She was later evacuated, carrying one dog in her arms and another in a shoulder bag. Asked where she was going, she replied, “I have no clue.”

The general contractor on the project, Leon D. DeMatteis Construction Corp. of Elmont, posted a statement on its Web site today: “First and foremost, our thoughts and prayers are with the families of those affected by this terrible tragedy. We are currently in the process of gathering all the facts surrounding this unfortunate accident and will provide more details as they become available.”

Sorbara Construction, a subcontractor, was in charge of operating the crane. A woman who answered the telephone at Sorbara today said no one was available to comment.

The neighborhood, not far from the mayor’s official residence, Gracie Mansion, has undergone a construction boom in recent years, with high-rises swiftly replacing older, low-rise brownstones.

Full of bars and casual restaurants, the neighborhood is populated with a mix of retirees, students, and young professionals. Until recently, it had been considered one of Manhattan’s more affordable neighborhoods.

Cranes at the site had generated several complaints in the neighborhood, including reports that safety barriers were breached and heavy loads passed over the heads of pedestrians, according to city building department records.

Inspectors found that most of the concerns were unwarranted, but they did temporarily order one crane at the site to stop all work on April 23 for not having the proper permit and for operating the crane in an unsafe matter.

Building Department records also said officials halted work after a crane on the site failed a “load test” on April 22. The crane passed a second test, however, the next day, and no violation was issued.

In a March 15 accident about 2 miles to the south, contractors building a 46-story condominium near the United Nations were trying to lengthen a crane when a steel support broke, killing seven people. A four-story town house was demolished and several other buildings were damaged.

A buildings inspector had found the crane to be safe a day before the collapse; another inspector resigned after his arrest on charges of lying earlier about inspecting the same crane.

In April, the city’s buildings commissioner resigned, under fire over a rising number of deadly construction accidents that have left more than 26 construction workers dead in the past year.

Since then, the city has added extra inspections at building sites and required that its staff be on hand whenever the towering cranes were raised higher, a process known as a jump. But yesterday, just a day before the newest accident, the city reversed that rule, allowing crane jumps without the presence of inspectors. Procedures at the sites are still being revised.