A multi-agency rescue mission to save two people stranded on a yacht hundreds of kilometres off the NSW coast has resumed.

The Spirit of Mateship yacht first activated a distress beacon at about 12.40pm on Monday while located about 185 kilometres off Nowra, south of Sydney, after suffering what is believed to be a mechanical issue and began taking on water.

Three helicopters made contact with the 19-metre yacht on Monday but could not retrieve the two crew members because of fuel considerations.

NSW Police vessel Nemesis reached the yacht, located about 130 nautical miles south-east of Sydney, on Tuesday morning and made contact with sailors. A Royal Australian Navy vessel has also reached the yacht and is assisting.

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