Authorities were told early on Monday the guest from the Pacific Adventure was in the water 10 nautical miles south-southeast of Sydney Harbour.
Cruise operator P&O said a person-overboard alarm was raised on the ship at 4am.
Authorities say a life ring from the cruise ship is yet to be recovered. (Bianca De Marchi/AAP PHOTOS)
NSW Police Marine Area Command head Joe McNulty said swells of up to five metres were forcing authorities to rely on heat-seeking technology to find the passenger.
"Hopefully we can identify a person by their heat signature in these cold waters," Superintendent McNulty told ABC Radio.
The search area was 18km outside Sydney Heads and covered a large area, spanning around 60 square nautical miles of water, he said.
Authorities had some hope of retrieving the passenger alive given a life ring from the cruise ship was yet to be recovered.
"There is a person out there hopefully close to a life ring or in that life ring," Supt McNulty said, adding that the search would continue through Monday.
"The timeframes for survival is still within the limits," he added.
The search and rescue is being led by police and involves the Pacific Adventure and nearby cruise ships.
Rescue vessels have been deployed by the Australian Maritime Safety Authority's Joint Rescue Coordination Centre.
A P&O spokeswoman said the family of the overboard passenger was "being cared for by our onboard team while every effort is being made to find (the passenger)".
The Pacific Adventure was due to dock at Sydney's White Bay Cruise Terminal inside the harbour on Monday morning after a three-day cruise off the NSW coast.
3°C