Australian authorities were Wednesday responding to a distress call from a boat believed to be carrying up to 180 asylum-seekers and taking on water, Home Affairs Minister Jason Clare said.
The Australian Maritime Safety Authority received the call at 4:30 am (1830 GMT Tuesday) and had called for commercial ships in the area, some 50 nautical miles south of Indonesia, to offer assistance.
"The boat has rung, said it's in distress, that it's taking on water," Clare told the Australian Broadcasting Corporation.
"Whenever you have a call like that, you take it seriously."
The boat, thought to have 130 and 180 people on board, is the latest in a series of asylum-seeker boats attempting to reach Australia's remote territory of Christmas Island from Indonesia.
The incident comes after more than 90 people are estimated to have drowned when two asylum-seeker vessels went down in the waters between Christmas Island and Indonesia in separate incidents in recent weeks.
The latest boat was understood to have turned around after it began taking on water. Clare said an Australian ship, the HMAS Wollongong, was an its way and was expected to be there soon.
"If the vessel is sinking, if the vessel cannot make it back to Indonesia, we will have HMAS Wollongong on the scene, as well as any merchant vessels that might be available, to rescue the people on the boat."
Canberra's bid to deter people smugglers from making the dangerous voyage to Australia by sending asylum-seekers to Malaysia for processing has so far failed to be passed by parliament.