Locals and a passing fisherman rescued a 25-year-old man from the sea and took him to Little Manly Beach.
He was treated at the scene by paramedics for hypothermia and abrasions to his arms.
The man told police he and his 49-year-old friend, as well as a dog, had launched their boat from Tunks Park boat ramp at 9pm last night but the boat capsized about 3am.
NSW Police Inspector Andrew Veale said the two men were out on the water as one of the men wanted to purchase the boat.
As they had been boating out on the harbour, the rough seas caused the boat to capsize.
“They struck large seas, the boat has overturned, throwing the two occupants and one of the occupants’ dogs into the water,” Inspector Veale said.
At about 9am, some debris from the boat including the fuel tank were found two nautical miles from Sydney out at sea.
The dog was found alive about 10am this morning.
“The dog on board the vessel was located at Cave Beach a short distance away,” Inspector Veale said.
Police are now searching for the man.
It’s understood there were no life jackets, lights or safety equipment onboard the boat.
An air, sea and land search is currently underway.
“We’re hoping for the best, the search will continue, we’re hoping to find the 49-year-old gentleman alive,” Inspector Veale said.
“We are confident and want to be confident.”
Anyone with information about the incident is urged to contact police or Crime Stoppers on 1800 333 000.