Two families in east London are breathing a big sigh of relief this holiday season that their boys are okay.

On Christmas Eve, the two grade-schoolers found a loaded handgun in their adjoining backyards.

"We just found it just around here," says Zach Showers, 8, as he motions to an area in the yard.

"He (friend Dylan) thought it was like dog poop or something," adds Zach.

"It could have been a lot of poop," jokes Dylan Turner, 7.

What the youngsters discovered was a loaded .44 calibre Ruger handgun stuffed inside several plastic bags.

"They (the bags) were all grey but the last one was yellow. When we looked inside there was a gun. But we kept it in the bag," says Dylan.

The first thing they did was bring it to Zach's father Carl Showers.

"Yeah, I started trembling actually because of the thoughts going through my mind that it could have been the worst Christmas ever. Both the boys could have been seriously hurt," says Showers.

Showers then called police who picked up the weapon and talked to the boys.

His next call was to Dylan's dad, Jason Turner.

"But it still sends shivers right up your spine at the whole story and what was found, a live weapon in your own backyard," says Turner.

How the gun ended up in the backyard and in the hands of children no one knows for sure but the two homes back onto an empty field.

The homeowners believe someone could have easily come along and just tossed the bag over the fence, right into their backyard.

According to London police the gun was reported stolen in North Bay in 1999.

So far, they haven't been able to locate the owner.

Police say the gun is not connected to any crimes at this point.

Meanwhile, it's a Christmas tale the two playmates won't soon forget.

The pair have been nominated by police for Little Hero awards.

"Very proud of them for doing the right thing and very nice of the police to think of them," says Turner.