A combination of heavy seas and the vessel's size prevented a salvage team from bringing it to shore.

A married couple, both aged 78, from from Sydney and a 67-year-old man from the Central Coast died when the 11.7-metre vessel capsized in 30-knot winds and a 2-metre swell.

The couple's son, 50, and granddaughter, 16, were pulled from the boat by volunteers and treated for hypothermia at John Hunter Hunter Hospital.

The pair were discharged on Friday morning.

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The vessel left Shoal Bay at 8am, heading south to Ettalong when an emergency beacon was set off about 10am advising the vessel had overturned about seven nautical miles off Stockton Beach.

The Westpac Rescue Helicopter, Marine Rescue crews from Newcastle and Port Stephens, the police marine command raced to the location.

A rescuer was winched down to retrieve the two survivors.

"It was quite a traumatic scene for all," Ambulance NSW Inspector Luke Wiseman said.

"Quite high sea conditions, with significant winds. It was rough when they got there and they had a lot of debris to contend with."

Manager of Port Stephens' Imagine Cruises, Frank Future said the initial call suggested it may have been a light plane crash.

"They quickly realised it was a vessel. We were hugging the coast because it was very, very choppy," he said.

"Winds were westerly hitting at 30 to 35 knots when they first came in - that's 70 kilometres. Further off the coast it would have been fierce."

An investigation into how the accident happened is underway.