Motivated by suggestions that binaries with almost equal-mass components ("twins") play an important role in the formation of double neutron stars and may be rather abundant among binaries, we study the stability of synchronized close and contact binaries with identical components in circular orbits. In particular, we investigate the dependency of the innermost stable circular orbit on the core mass, and we study the coalescence of the binary that occurs at smaller separations. For twin binaries composed of convective main-sequence stars, subgiants, or giants with low mass cores (M_c <~0.15M, where M is the mass of a component), a secular instability is reached during the contact phase, accompanied by a dynamical mass transfer instability at the same or at a slightly smaller orbital separation. Binaries that come inside this instability limit transfer mass gradually from one component to the other and then coalesce quickly as mass is lost through the outer Lagrangian points. For twin giant binaries with moderate to massive cores (M_c >~0.15M), we find that stable contact configurations exist at all separations down to the Roche limit, when mass shedding through the outer Lagrangian points triggers a coalescence of the envelopes and leaves the cores orbiting in a central tight binary. In addition to the formation of binary neutron stars, we also discuss the implications of our results for the production of planetary nebulae with double degenerate central binaries.
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