Forty year old Dritan Katana and Almar Casanova, who is 30, have been charged with producing cannabis at the premises formerly known as the Buccleuch Hotel in Trinity Street.
They also face charges of being concerned in the supply of cannabis, a breach of the Electricity Act and culpable and reckless conduct .
Drug squad officers carried out a raid on the building on Thursday morning when they executed a search warrant.
The pair - who are from Albania but whose addresses were given as no fixed abode - made no plea and the case was continued for further examination at Selkirk Sheriff Court following a privaste hearing on Friday.
They were remanded in custody and are due to appear again at Jedburgh Sheriff Court next week.
Confirming officers had recovered £500,000 of cannabis, Inspector Robbie Noble of Police Scotland said:"We remain committed to disrupting the illicit supply of drugs in our communities and we will use every tool and resource at our disposal to remove these illegal substances from our streets"