Three people have died and two have been rescued after a catamaran overturned off the coast of Newcastle, police have confirmed.

Key points: Five people were sailing on a catamaran when it capsized in rough seas

Five people were sailing on a catamaran when it capsized in rough seas The Bureau of Meteorology has issued a strong wind warning for the Hunter coast

The Bureau of Meteorology has issued a strong wind warning for the Hunter coast NSW Ambulance has warned people heading out to sea to assess the rough conditions which will continue over the next few days

A 16-year-old girl and her 50-year-old father were winched off the capsized catamaran during the rescue, but the girl's 78-year-old grandparents and another unidentified sailor died in the accident.

About 10.10am on Thursday an emergency beacon was activated from a 11.7-metre catamaran that overturned about seven nautical miles off the coast at Stockton Beach.

Three bodies were found in the water and retrieved by Marine Rescue.

The father and daughter were taken to John Hunter Hospital, where they are being treated for hypothermia.

All five people were wearing life jackets, authorities said.

NSW Ambulance Acting Superintendent Luke Wiseman said rescuers were faced with a "very confronting scene" when they arrived, with the two survivors clutching onto the overturned catamaran.

The boat's tender also capsized.

The catamaran was on a voyage from Port Stephens to the Central Coast when it capsized.

Three bodies were found in the water after the catamaran capsized. ( ABC News )

Acting Superintendent Wiseman said the Westpac Rescue Helicopter crew battled high seas and 30-knot winds during the operation.

"What made the rescue quite difficult is being an overturned vessel, there was quite a lot of debris and ropes in the water at the time," he said.

On Thursday morning the Bureau of Meteorology issued a strong marine wind warning for the Hunter coast with north-westerly winds of up to 55 kilometres per hour.

Acting Superintendent Wiseman urged people to make sure they were equipped with emergency activation beacons because rough conditions were expected for the rest of the week.

"You need to really assess the conditions and particularly with your capabilities of your vessel and also the operator of the vessel," he said.

Acting Superintendent Grant Healey, from the NSW Police marine squad, said sea conditions had been extremely rough.

"The conditions were difficult. We had 25 to 30-knot westerly winds with a sea of 1 to 2 metres [easterly swell] coming the other way, so it was fairly messy out there," he said.

He said the vessel would not be recovered until conditions improved.

"It's not in a position where we can recover it or salvage it yet," he said.

"But warnings have been sent out to the marine and sailing community to avoid the hazard."

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 1 minute 13 seconds 1 m 13 s Ambulance NSW describes 'confronting scene' at capsized catamaran.

Marine area detectives are preparing a report for the coroner and are on their way to Newcastle to interview those involved.

Acting Superintendent Healey urged people on boats to make sure their safety equipment was up to date.

"Before you set sail or get underway for those longer journeys, ensure you know what the weather conditions are," he said.

"Make sure you're trained and logging on and off with marine rescue."

The rescue operation had involved the Royal Australian Air Force, Joint Rescue Co-ordination Centre, the Lifesaver 1 Rescue Helicopter, NSW Marine Rescue and NSW Police.

Stockton Beach is a 32-kilometre stretch on the north side of the breakwall outside Newcastle Harbour entrance.

It has significance for its long history of shipwrecks, including a 50,000 ton Norwegian bulk carrier, the MV Sygna, which ran aground during strong winds in 1974.