The man was found on the banks of the Hunter River about 9.30am on Monday and paramedics and members of the public couldn’t revive him.
Police said they found packages containing more than 50kg of a white powder believed to be cocaine “in the immediate vicinity”.
“The cocaine has an estimated potential street value of $20 million,” police said in a statement.
“A crime scene was established by officers from Newcastle City Police District and continues to be examined by specialist forensic police.”
The man is yet to be identified. A police spokeswoman said a post-mortem investigation would be carried out this week.
She couldn’t detail exactly where the suspected drugs were located but said it was close enough to the man for investigators to believe they were connected.
Organised crime squad detectives are investigating along with the Australian Federal Police and Australian Border Force.
Police and ABF divers will continue searching the area today.