Australian authorities Wednesday boarded a boat packed with asylum seekers off Indonesia and began transferring the 164 on board to a navy ship after the vessel ran into trouble in rough seas.
Australia's Customs and Border Protection agency said two military ships, the HMAS Wollongong and HMAS Leeuwin reached the rickety vessel as night fell in waters south of Java after the boat had issued a distress call.
"A boarding party from HMAS Wollongong has boarded the vessel and initial reports are that 164 people are on board," the agency said in a statement.
"Due to concerns about the seaworthiness of the vessel attempts are being made to transfer the people from the vessel to HMAS Leeuwin," it added.
"Continuing rough sea conditions will mean the transfer may take several hours."
Australia's Home Affairs Minister Jason Clare earlier told reporters that the boat, which issued an alarm just before dawn Wednesday, "appears to be upright and in a stable condition but the weather conditions were very rough".
Someone on board had used a satellite phone to make a distress call to the Australian authorities saying the boat was taking on water as it was pounded by three-metre (10-foot) waves.
The latest in a series of asylum boats incidents north of Australia's remote Christmas Island territory, it came one day after Jakarta and Canberra agreed to boost cooperation on such rescues following a recent spate of deaths.
Some 94 people are estimated to have drowned after two boats went down on the perilous sea route in recent weeks. One vessel capsized midway through its journey in an incident thought to have claimed 90 lives.
Customs said it was "anticipated that HMAS Leeuwin will transfer the people to Christmas Island" -- Australia's main processing centre for refugees -- once they have been removed from the stricken boat.
The boat is within Indonesia's maritime search and rescue zone and Clare said Australian rescuers were working with their Indonesian counterparts Bon the operation.
The emergency came one day after Prime Minister Julia Gillard hosted talks with Indonesian President Susilo Bambang Yudhoyono, agreeing to enhance cooperation on people-smuggling, particularly in search and rescue missions.
Clare said Australian and Indonesian police were also working closely to stop refugees paying people-smugglers to bring them to Australia -- with one man arrested in Indonesia on Friday suspected of being a key member of the syndicate behind the boat on which 90 people died.
Australian police are interviewing another suspect on Christmas Island, where all boat arrivals are initially taken while their claims are assessed.
More than 5,200 asylum-seekers have come to Australia so far this year on boats, many of which are fragile, wooden vessels from transit hubs in Indonesia.
Canberra's bid to deter people smugglers from making the dangerous voyage to Australia by sending asylum-seekers to Malaysia for processing has so far failed to be passed by parliament, despite the recent fatalities.