Police are scouring waters off Port MacDonnell in a desperate search for the child after receiving a call to an abandoned car left with its engine running near Cape Northumberland about 11.15am on Monday.
Officers spotted the bodies of a woman and small child in the ocean a short time later.
They have been identified as a 36-year-old woman from Compton, near Mount Gambier, and her toddler.
Officers from the Water Operations Unit, CFS and SES volunteers will help with the search.
Detectives from Major Crime Investigation Branch and specialist officers from Forensic Response Section are at the scene.
Police and other emergency services, along with volunteers including local fishing crews, searched for the baby on Monday until bad light forced them to stop.
"We do hold grave concerns. The child is less than one year old. In any conditions that would cause great concern about the child's ability to survive if not in the water," Superintendent Trent Cox told reporters.
"We're keeping an open mind about everything, but I don't hold out great hope."
Predicted bad weather could hamper search efforts on the water on Tuesday, but Supt Cox said police would still conduct searches of the coastline on foot and using thermal imaging drones.
Police are seeking information from anyone who saw the woman's car, a white 2015 Isuzu MUX with SA Registration S592BJR, or has any dashcam footage to contact Crime Stoppers and quote #195585.
"The reason we've made that public appeal is that we're trying to build a picture of the woman's movements leading up to her arriving at Cape Northumberland," Supt Cox said.
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