Footage allegedly shot from a boat near the crash point in the Hawkesbury River appears to show the plane losing altitude.
The seaplane can be seen flying overhead moments before disappearing towards the river bed.
The plane was discovered upside down at the bottom of Corwan Creek under 13 metres of water.
Police divers have recovered six bodies from the wreckage.
A police spokesperson has said: “For reason that are not known at this stage, the plane has hit the water and it has subsequently sunk.
“At the time of the collision, there was a pilot and five passengers on board. I can confirm the six people on the plane are deceased.”
The passengers were on a wine and dine experience on the seaplane, which offers views across Sydney.
Local reports say four of the passengers were British and an 11-year-old boy was among the dead.
The plane was believed to have been travelling from the Cottage Point Inn to Rose Bay.
A Sydney Seaplane spokesman confirmed that it was one of their aircrafts that had crashed but couldn’t provide any further information.
He said: “Obviously we are very concerned and trying to determine the details at this point. We are working with police at this time.”
Sydney Seaplanes fly over the city, above some of the city’s best views, including the Opera House, the Harbour Bridge and the bushland of the Hawkesbury River region.