Police believe there were two divers involved in trying to collect cocaine from a bulk carrier in the Port of Newcastle.
The body of one of the divers was found floating in the water on Monday, but it is unclear where the other diver is.
Floating around the body were numerous packages of cocaine with a street value in the tens of millions of dollars.
Fifty kilograms of cocaine was seized on Tuesday by police.
An additional 50kg made it into the community, but some remnants were found.
Police believe the original shipment or job was down for 300 kilograms — but they are unsure if the missing 200 kilograms made it to Australia.
It is believed the diver was attempting to collect the packages from the cargo ship, Areti.GR, when he got into trouble.
The ship is registered in the Marshall Islands, located between Australia and Hawaii, and is expected to depart for Argentina next week.
Some of the drugs are believed to have been attached to the hull of the ship.
Police have identified the scuba diver who died at the scene and believe he may have travelled from South America.
Detectives have known for some time that ports within easy reach of Sydney are being targeted by international drug traffickers.
"Sydney is a huge market, I think we're all aware of that," Organised Crime Squad Commander Detective Superintendent Rob Critchlow said.
"We are certainly concerned about the ports of Newcastle and Wollongong. Organised crime definitely look for weaknesses to target at those ports.
"Any port has a lot of movements — so a lot of ships, a lot of trucks, a lot of people — so it is easier to hide drugs among that."
A post-mortem will be carried out on the diver found dead on Monday morning.
Police are also continuing to search the vessel and believe they have only recovered a "portion" of the shipment.
Law enforcement officers said the alleged smuggling operation was unlikely to be a first attempt.
"This was a well-drilled, professional group … comfortable sending drugs on a ship across the world," Superintendent Critchlow said.
"They knew exactly what they were doing."
The death of the scuba diver exposes gaps in port security due to workforce cuts to Australia's frontline border law enforcement agency, according to local federal MP Sharon Claydon.
The Labor member for Newcastle said the importation had highlighted shortfalls in port security by the Australian Border Force (ABF).
But an ABF spokesperson rejected the claims, saying the number of officers in the Newcastle branch had increased over the past year.
