The balls of multi-coloured light were seen by residents in St Bernard's Avenue around 10pm last Sunday.
Two weeks ago three similar sightings off the coast of Trusthorpe were explained as being made by afterburners from military aircraft on exercise.
But RAF bosses said this time there had been no fighter jets around the Louth area at that time last Sunday.
Steve Whittleton, 34, from St Bernard's Avenue, said: "I saw two UFOs - I'm certain of that.
"There were two massive orange balls right above me, moving slowly.
"I wanted to rub my eyes but I did not want to miss them. I told my wife, but she thought I was bonkers but I know what I saw."
A spokesman at The Coastguard HQ in Great Yarmouth said the strange lights seen over Trusthorpe, last week, were nothing to be concerned about – and were likely to have been made by military aircraft.
But an RAF spokesman said Sunday's orange balls were a mystery.
They said: "We don't think there were any jets in the sky at the time. It's very unusual."
The spokesman said Air Traffic Control had been closed on Friday night, which meant private aircraft flights were likely to have gone unrecorded.

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