Christmas Island in the Indian Ocean.
"Initial reports indicate 95 people have been recovered from the water including two deceased persons and two critically injured persons," home affairs minister Jason Clare said.
He added that they were being transferred to an immigration facility on Christmas Island, but did not give any details on nationalities, although in the past they have mostly come from Iran, Iraq, Afghanistan and Sri Lanka.
"The people will undergo initial health, security and identity checks and their reasons for travel will be established," said Clare.
He said an air and sea search was continuing, although it was not clear if anyone was still missing.
Christmas Island administrator Jon Stanhope told ABC it was fortunate that the customs vessel Ocean Protector was close to the boat when it went down and was able to respond quickly.
"Customs and Border Protection were aware that the vessel was approaching the island," he said.
"The Ocean Protector was approaching the scene at the time the boat capsized. I think it's a very fortunate coincidence that customs were within the vicinity and were able to respond very quickly.
"My understanding is that all of the asylum-seekers were in the water when the Ocean Protector arrived."
Australia is facing a steady influx of asylum-seekers arriving by boat, many of whom use Indonesia as a transit hub, paying people-smugglers for passage on leaky wooden vessels after fleeing their home countries.
Hundreds have died making the treacherous journey over the past few years.
Earlier this month, a naval vessel plucked 77 asylum-seekers to safety after their boat broke up on the way to Australia.
While there has been a lull in boat arrivals in recent months due to heavy swells and poor weather, the numbers arriving are starting to spike again.
At least four boats were taken to Christmas Island over the weekend, Stanhope said, with one of them carrying 128 people.
To deter people from making the dangerous journey, the Australian government last year launched a harsh new offshore processing policy, with many boatpeople being taken to camps on Nauru and Papua New Guinea in the Pacific.
But it has been criticised by rights advocates, with Amnesty describing conditions as "appalling" while the United Nations has warned the asylum-seekers' detention was arbitrary.
Australia last year dealt with a record 17,202 asylum-seekers arriving by sea.
With the boats continuing to arrive, the conservative opposition has declared the policy a failure and said the government had lost control of Australia's borders.