Twenty-five people were plucked to safety but more than 70 were unaccounted for after the boat carrying people from Lebanon, Jordan and Yemen went down off the main Indonesian island of Java, police said.
It was the first deadly asylum boat accident since Tony Abbott became Australia's prime minister this month and came just days before he visits Indonesia for talks likely to focus on his tough policies aimed at deterring boatpeople.
Hussein Khodr called people in his home village of Kabiit "and told them that the boat sank at dawn, when waves destabilised the vessel," said Ahmad Darwish, local government head in the northern Lebanese village.
Darwish said it was not the first time that people from the poor region had sought to reach Australia by boarding rickety asylum-seeker boats in Indonesia.
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Warsono, a police official in Cianjur district on Java, said the bodies were discovered floating in an estuary today morning.
The official, who like many Indonesians goes by one name, said, it was dangerous for rescue boats due to "big waves" and the boat had been "broken into several pieces".
A spokesman for the Indonesian search and rescue agency said that four of its boats, along with fishing boats, had earlier been searching for the missing.
The search had been called off when it got dark and would resume again tomorrow, he said.
They had departed from the fishing town of Pelabuhan Ratu, in the district of Sukabumi, on the south coast of western Java, he said.
The Lebanese foreign ministry said that it had been informed by its ambassador to Jakarta that 18 Lebanese had been pulled from the water during the rescue operation.
The boat suffered mechanical problems 10 hours after setting off and attempted to retrace its course back to Indonesia -- but it ended up sinking, said the ministry.