Five people are feared dead after the wreckage of the helicopter they were in was seen sinking off the coast of NSW.

The Bell UH1 helicopter dropped off radar near Anna Bay, north of Newcastle, about 6.30pm on Friday.

The tail rotor was found about 8.45am on Saturday by water police before a rescue chopper sighted the main airframe about five miles south of Fingal Bay, the Australian Maritime Safety Authority said.

The observer in the rescue chopper watched the airframe sink "a short time later" before boats could reach the area.

"The location of the airframe is consistent with the drift model of where the aircraft was believed to have entered the water," the AMSA statement said.

"There have been no sightings of the occupants of the helicopter."