Three people died during the rescue effort as volunteers went to the aid of a yacht at the Ballina Bar in northern NSW on Monday night.
NSW Police said four people made it to shore after two vessels got into difficulties in heavy seas.
Emergency services were contacted about 6.15pm when a yacht was reported to be in trouble off the South Ballina break wall.
"A crew from Marine Rescue NSW responded however their vessel rolled while crossing the Ballina Bar in heavy conditions," police said in a statement.
"At this time three people are confirmed deceased, while four made it to shore."
Police said the search is continuing with one person believed to be missing from the yacht.
A Marine Rescue NSW spokesman said it had been a terrible night for the organisation.
"Our focus right now is supporting the families of those affected and our volunteers."
NSW Ambulance paramedics treated four people but none were believed to have life-threatening injuries.
The search is expected to continue, co-ordinated by Marine Area Command from its Sydney headquarters.
Police were assisted by the Australian Maritime Safety Authority Challenger jet and the Westpac Rescue Helicopter from Lismore.
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