At least two young children were among those missing at sea after a fishing vessel carrying a family on their annual muttonbirding trip capsized in Foveaux Strait.
One of the nine people from the vessel, the 11m Easy Rider, was found alive after 18 hours clinging to a petrol can in the icy waters between Bluff and Stewart Island.
One body was reported to have been found at about 8.15 tonight.
But there has been no sign of the others despite a wide-ranging search.
All on board the vessel were part of one extended family, and those missing include two children.
The 47-year-old skipper of the missing vessel, Rewai Karetai, saved the lives of three people in a similar situation on the same stretch of water in January.
Inspector Lane Todd of Invercargill police said the Easy Rider left Bluff at about 7.30pm on Wednesday with three crew and six passengers who were going to be dropped off on the Mutton Bird Islands at the Great South Cape.
The boat did not make a rendezvous with a helicopter at about 2pm yesterday, and police were notified.
A search was started and tonight rescuers found the one survivor.
Mr Todd said the survivor was plucked from the sea around Bishops and Clerk Islands, to the west of Stewart Island soon after 6pm.
He told police he was on the deck of the boat soon after midnight with two others when it was hit by a large wave and capsized almost immediately.
The rest of those on board were in the wheelhouse of the boat.
"The survivor was able to pull himself up onto the hull where he remained for about two hours before the boat sank," Mr Todd said.
A MetService spokesman said the Easy Rider battled 4m swells and 35 knot gales overnight in heavy rain and poor visibility.
"Pretty nasty conditions to be out in," the spokesman said.
Mr Karetai was hailed as a hero in January when he towed three exhausted people from the strait in his dinghy after their fishing boat sank.
He was camping on Ruapuke Island, which was otherwise deserted, with his wife Gloria when they heard noises about 250m off shore.
Mr Karetai rowed out in the darkness to rescue Southland farm manager Barry Bethune, 46, and two women in their forties who had spent more than five hours in the water after their vessel capsized.
Tonight his aunt, Jill Karetai, said the family went muttonbirding every year. This trip was the first of many he was to take for the season.
She said the whanau had gathered at Bluff Harbour and waved them off on Wednesday night.
"It's horrible because we know there's some babies [young children] on board and two or three or four at least of my brother-in-laws and nephews - it's just dreadful," she said.
Ms Karetai's brothers-in-law Peter Bloxham and John Karetai were on the boat.
She said police had told the family the person pulled from water had been wearing a lifejacket.
They also said there was an oil slick on the water.
"I don't even know who it was who they've pulled from the water. It's an absolutely terrible, terrible time.
"I'm in shock. I'm shaking. We're just waiting and praying that they'll all be okay. But we don't know, we just don't know nothing. It's horrible."
She said the tragedy was especially dreadful because of Mr Karetai's heroic rescue effort in January.
A source in the Bluff boating community said last night rescuers had started to "find bits" in the strait that had come off the boat.
He saw Mr Karetai, known as Spud, just before he left Bluff.
"The conditions out on the strait were pretty atrocious," he said.
"They probably shouldn't have gone. I've been in the business for 45 years ... Personally, I wouldn't have gone out of the harbour."
The source said Mr Karetai's rescue efforts in January were admirable.
"And now he's in the same situation himself ..." he said.
After that rescue, Mr Karetai told the Herald he spotted a man hanging off the anchor rope on the front of his boat, anchored 250m off shore.
"As I got closer to the boat, the next minute there were two ladies who popped out the back of my boat. (Mr Bethune) had already given up, basically. I think it was more the shock of having his son die with him.
"He kept drifting in and out of consciousness, and I was scared that we were going to lose him."
Mr Bethune's son Shaun Bethune, 23, and best mate Lindsay Cullen, 59, did not survive the icy waters.
Mr Karetai said he was gutted he could not save them.
Last night, members of Mr Karetai's extended family were rushing to Bluff.
One posted a message on Facebook to update the rest of the whanau.
"Rewai boat's missing I'm heading to Bluff," Tawhiri Karetai wrote.
"Whanau don't fret I will keep everyone posted when I get more news. They haven't been able to contact Spud. Kia kaha for those on the boat."
The Transport Accident Investigation Commission last night opened an inquiry into the accident.
A three-member investigation team - a master mariner, a naval architect, and a liaison and logistics manager - was to arrive in Invercargill this morning.