Dario had been swimming with his twin Danio and friends when they got caught in a strong wave that carried them to deep water.
Officers in the Timor-Leste National Police Navy Unit carried out a sea rescue but the child was not found until Friday morning when medical staff were unable to save his life, officers have said.
Paulo, a bystander who witnessed the event and rescued Danio, said the children had been playing in shallow water when a wave came and pulled them out to sea.
"I sat on the edge of the sea at around 2 o'clock. The children were swimming suddenly there were children who came out asking for help. I saw a child who sank and I saw his hand above the sea, I immediately entered the sea and saved the child,” Paulo said.
"I went to help the other child but was not found because the waves and the sea were dirty," he said.
The twins were from Bidau Masaur in Dili.