Two bodies have washed ashore on a beach in Port Stephens, north of Newcastle.
The bodies are reportedly two male crewmembers from a missing yacht that was travelling to area from Broken Bay, north of Sydney.
Police and emergency crews continue to search the isolated patch of beach with torch light where the bodies washed up.
Police had been searching for the sailors in the area since their 26-foot yacht failed to report in on Thursday night.
The last time contact was made with the crew was 11.30pm Thursday night.
The ABC reports the bodies were found on Birubi Beach at a place known at Tin City, one near a dinghy while the other was found about 500 metres south.
Glen Ramplin from Hunter rescue helicopter said the search for the men began around lunchtime but the yacht was yet to be located.
"At this stage, the yacht is still unaccounted for," he said.
"We believe the Pol Air helicopter is searching as well as Sydney's Westpac helicopter.
"They had originated near Broken Bay, and so the search was begun and unfortunately two bodies have been located."