The 41 asylum seekers were sailing from Sri Lanka to Australia 10 days ago when their vessel started to sink in the Indian Ocean.
An Australian surveillance aircraft assisted members of the Sri Lankan Navy to rescue those on board, The Australian reported.
Operation Sovereign Borders boss Craig Furini, who is in Sri Lanka with Home Affairs Minister Peter Dutton, praised the country’s navy for pulling off the rescue.
By the time the Sri Lankan navy managed to reach the boat, it had been inundated with water.
“This highlights the very real danger of attempting these journeys,” Major General Furini told The Australian.
“Before (Operation Sovereign Borders) started in 2013 more than 1200 drowned at sea attempting such journeys at sea. Since Operation Sovereign Borders began, there has been none.”
It is the second vessel to attempt to reach Australia in the past month, and the third since March.
Several other boats are believed to have been detected in recent weeks.
Mr Dutton is in Sri Lanka to hold high-level meetings with the government, focusing on people smuggling.
The home affairs minister met with Sri Lanka’s President Maithripala Sirisena, Prime Minister Ranil Wickremesinghe and his ministerial counterpart in Colombo today.
“The purpose of the visit is to prosecute Operation Sovereign Borders’ interests and to engage Sri Lankan authorities on counter-terrorism matters,” Mr Dutton’s spokeswoman said.
“We greatly value the ongoing co-operation on regional maritime security.”