Southland Area Commander Mike Bowman said emergency services were notified of the capsize at the Riverton Bar at 2.55pm.
"The boat, a recreational craft, capsized approximately 100 metres off shore with five people on board."
Two people were recovered alive from the water and were brought to shore before being transported to Southland Hospital.
A third person was unable to be revived by emergency services staff after being recovered unresponsive and brought to shore.
The fourth person was located dead in the water and the search for the fifth person is ongoing.
The Riverton and Bluff Coastguard, multiple rescue helicopters, Fire and Emergency New Zealand, Hato Hone St John, Police Search and Rescue and other volunteers were a part of the search and rescue effort, he said.
"This is an absolute tragedy and our hearts go out to all those impacted by this devastating incident."
