Just like everything else, setting boundaries is appropriate. They are not too young to have rules. While somehow they discovered a pleasant sensation, limit it. It's ONLY to be done in their bedroom. Period.
and I'd work really hard to keep them more occupied doing fun things so this isn't their go to excitement.
I never allowed my boys to 'play' or touch themselves in public. I'd say "hands off". It's part of teaching your kids social manners and that begins when they are young.
You're right to not want to make him feel like what he is doing is bad/gross/wrong etc. You can set boundaries and say that what he is doing is private and that if he'd like to touch himself then he should go into his room and close the door so he can have some privacy. Making a huge deal out of it is only going to make him want to do it that much more. Having a verbal cue that you can use so that he knows to stop touching himself but without embarrassing him would also be a good idea.