The Australian Navy has intercepted a boat carrying what is believed to be more than $700 million worth of heroin off the coast of Tanzania.

Navy personnel from HMAS Melbourne seized and destroyed more than 350 kilograms of drugs after discovering the suspected drug smuggling vessel on Wednesday.

The Navy says it identified a suspicious substance concealed onboard while conducting a standard sweep of the boat.

The drugs were tested and returned a positive reading for heroin.

The Australia Commander of Combined Task Force 150, Commodore Daryl Bates, commended HMAS Melbourne's efforts.

"Melbourne has once again demonstrated how beneficial Australia's commitment is to the Indian Ocean region and the fight against international terrorism and violent extremism," said Commodore Bates in a statement.

"During her time with Combined Maritime Forces, she has successfully disrupted a piracy attack, and conducted four successful narcotics seizures, seizing 23.8 kilograms of methamphetamines and now 353 kilograms of heroin.

"These seizures have severely impacted the funding network of those terrorist organisations that rely on these shipments for income."

HMAS Melbourne is deployed on Operation Slipper, "in support of deterring terrorism and promoting peace and security in the maritime regions of the Middle East and Indian Ocean".