Ships have so far picked 110 survivors from the sea, but officials believe about 200 people were on the boat. Three bodies have been recovered.
The ship, believed to be carrying asylum-seekers, capsized on Thursday.
Australian patrol vessels, merchant ships and aircraft have been helping with the rescue.
Christmas Island is closer to Indonesia than Australia, and is targeted by asylum-seekers hoping to get to Australia, often on boats that are over-loaded and poorly maintained.
Officials said the boat issued an emergency call and was later found to be in distress by an Australian surveillance plane.
“We’re still in that critical window where more lives could be saved,” Australia’s Home Affairs Minister Jason Clare said.
Everyone on board the boat was said to be male, with a 13-year-old boy among those rescued. Their nationalities remain unclear.
About 40 people were found clinging to the hull of the boat and more were found holding on to debris, Jason Clare said.
A spokeswoman from Australia’s Maritime Safety Authority (AMSA) said water temperatures were fair, which made finding more survivors more likely.
Those rescued have begun arriving at Christmas Island, where Australia has a large immigration detention centre. They were said to be in good health.
In recent years a flow of asylum-seekers, mainly from Afghanistan, Sri Lanka and Iraq, have been making their way to Australian territory by boat via Indonesia.
There have been a number of capsizes blamed on unseaworthy vessels carrying too many passengers.
About 50 asylum-seekers died when their boat broke up on rocks off Christmas Island in December 2010.
“This accident again underscores the dangerous nature of these hazardous journeys, and the desperate and dangerous measures people will resort to when they are fleeing persecution in their home countries,” the UN refugee agency said in a statement.
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