Australian Prime Minister Kevin Rudd said on Sunday the German merchant raider “Kormoran” was found about 150 kilometres (93 miles) west of Shark Bay, which is near the country's westernmost point.
He said the discovery was an important clue to concluding the search for the cruiser HMAS Sydney, which went down in November 1941 with its entire crew of 645 after a fierce battle.
"We are one step closer as a nation to hopefully finding Sydney," Rudd told journalists at the Australian War Memorial in Canberra.
The HMAS Sydney was sunk in battle with the Kormoran while sailing home to Australia from Sumatra in November 1941 but the exact location of the wreck in the vast Indian Ocean was uncertain.
"All of us concerned about this great ship and those of us who are concerned about what happened to the 645 brave souls who went down with her, have all these years been wondering where she lay and what in the end actually happened," Rudd said.
The Kormoran was also sunk but most of the German vessel's crew of 397 survived and were able to give accounts of what had occurred. The veil of mystery surrounding the naval battle has sparked several major hunts, the latest being the Finding Sydney Foundation's largely government-funded search using sonar equipment which began early this month.
The foundation said the Kormoran wreck was several pieces of hull amid a large and dense field of debris lying some 2,560 metres (8,450 feet) underwater. “The wreckage fits perfectly with what we know and expected to see for Kormoran from testimony of the German survivors," search director David Mearns said in a statement.
Search teams believe the site of the battle is about four nautical miles south of the Kormoran wreck site because this is where more scattered debris, likely to have come from the HMAS Sydney after she was gravely damaged by a torpedo hit and being heavily shelled, has been found.
The team will now narrow their search to 300 nautical miles and this week will use a remote-operated vehicle to search the Kormoran and the battlefield.
Chairman of the foundation Ted Graham said finding the Kormoran put searchers "halfway to solving where the Sydney is." "Without finding the Kormoran our job would've been much harder," he said. "It's a fantastic step forward."
Navy chief Vice Admiral Russ Shalders said the find would "allow us to proceed towards finishing something that has been a mystery - Australia's major maritime mystery."