Cocaine with a potential street value of $245 million has been seized from a yacht being sailed toward Australia from the South Pacific.

The joint agency international drug trafficking sting occurred on Lake Macquarie on Wednesday afternoon where state and federal police allegedly uncovered 700kg of cocaine hidden inside the twin hulls of the yacht.

A man arrested after the yacht carrying cocaine was intercepted. Credit:NSW Police

Dennis Malcolm Bath, 68, was arrested on board the vessel at Toronto, while Craig William Lembke, 47, was taken into custody at a Warners Bay hotel and Kent Anthony Jackson, 63, was arrested at Islington.

The men, who all live in working class suburbs of Newcastle, were formally refused bail in Newcastle Local Court on a charge of importing a commercial quantity of a border controlled drug.